Junko Nakagawa: Economic activity, prices, and monetary policy in Japan

Speech by Ms Junko Nakagawa, Member of the Policy Board of the Bank of Japan, at a meeting with local leaders, Gunma, 17 April 2025.

The views expressed in this speech are those of the speaker and not the view of the BIS.

I. Current Situation of Economic Activity and Prices

A. Current Economic Developments Abroad

I would like to begin my speech by taking a look at the current situation of overseas economies (Chart 1). Regarding global business sentiment, as of March 2025, the Purchasing Managers' Index (PMI) for the manufacturing industry has been at around 50 - the breakeven point between improvement and deterioration - and the PMI for the services industry has continued to improve. In the January 2025 World Economic Outlook (WEO) Update, the International Monetary Fund (IMF) projected that the growth rate of the global economy would be in the range of 3.0-3.5 percent for both 2025 and 2026, which is broadly in line with the average growth rate since 1980. The IMF will release the next quarterly update of the WEO this month, and attention is warranted on its assessment of the future path of trade policies in each jurisdiction and global developments in economic activity and prices affected by such policies.

B. Current Economic Developments in Japan

I will now turn to the current situation of Japan's economy. The Bank of Japan judges that the economy has recovered moderately, although some weakness has been seen in part. It is necessary to pay attention to the fact that there are high uncertainties regarding trade policies in each jurisdiction and developments in overseas economic activity and prices affected by such policies. I will come back to this later.