The Bank of Japan (BOJ) released its July 2026 Outlook for Economic Activity and Prices, projecting that the year-on-year rate of increase in the consumer price index (CPI, all items less fresh food) will accelerate to a level clearly above 2 percent from the second half of fiscal 2026. This is driven by ongoing wage pass-throughs, crude oil price increases, rising semiconductor prices due to global AI demand, and recent yen depreciation. Thereafter, the rate of increase is expected to decline toward around 2 percent in the second half of the projection period. The BOJ noted that risks to the CPI outlook are skewed to the upside, with a risk that underlying CPI inflation could deviate upward above 2 percent.