BOJ Eyes Growth Upgrade Amidst AI Boom and Yen Woes

The Bank of Japan is poised to consider revising its economic growth forecast upward for fiscal 2026, according to sources familiar with the central bank's thinking. This potential adjustment comes as strong demand for artificial intelligence and falling oil prices are expected to provide a boost. However, the BOJ is likely to maintain its vigilance regarding inflationary risks, as companies continue to pass on increased costs to consumers.

Despite a potential trimming of its core inflation forecast for the current fiscal year due to declining oil prices following a preliminary peace deal, the central bank's focus is unlikely to shift from the upward price pressures. These pressures are being fueled by a weaker yen, steady wage gains, and the lingering effects of past energy shocks. The BOJ is expected to hold its short-term policy rate at 1% at its upcoming meeting.