The Bank of Japan (BOJ) stated in its July 2026 "Outlook for Economic Activity and Prices" report that the Japanese economy is likely to continue growing moderately, albeit at a slower pace, supported by AI-related demand and government measures, but dragged down by rising crude oil prices due to the situation in the Middle East. The report projects that the year-on-year CPI growth rate could be significantly above 2% in the second half of fiscal year 2026, influenced by rising semiconductor prices, a weaker yen, and higher crude oil prices, and is expected to converge around 2% by fiscal year 2028.