Last month, consumer price inflation surged nearly 5% month-over-month, while on an annual basis, it eased to 30.65%, marking the lowest since late 2021.<\/p>\n
“As you know, food prices are significantly affected by supply-side developments related to weather conditions. In January, developments in vegetable prices were particularly noteworthy in this regard,” he said.<\/p>\n
“Vegetable prices, which had fallen sharply in November due to temperatures exceeding seasonal averages, rose significantly in January following unfavorable weather conditions,” he added.<\/p>\n
“The impact of this development will extend into February,” Karahan suggested, pointing out, however, that with the supply conditions normalizing in the second quarter, they expected these effects “to reverse to a certain extent.”<\/p>\n
Starting his speech, he said that tight monetary policy “gradually yielded results in 2025,” while also evaluating the global and domestic economic outlook.<\/p>\n
Global developments<\/p>\n
On the global side, he mentioned that they continued to monitor developments related to precious metal prices, adding that non-energy commodity prices “maintained their upward trend despite recent volatility.”<\/p>\n
He also suggested that developed countries’ monetary policies are closely monitored due to their wide-ranging effects.<\/p>\n
“The Fed is expected to keep cutting rates in 2026, but the amount and timing of these cuts are still uncertain. On the other hand, markets are pricing a tighter monetary policy by the Bank of Japan,” he noted.<\/p>\n
Domestic outlook<\/p>\n
Moreover, addressing the domestic picture, he once again underscored the impact of services inflation on the headline inflation, reiterating that “the high level of services inflation was driven by rents and education in 2025.”<\/p>\n
Pointing to the price adjustment regulations in education, he said that the regulation-implied figures for 2026 indicate that there is “a certain room for disinflation on the education side.”<\/p>\n
Moreover, he said that the contribution of consumption to growth receded significantly in the first three quarters of 2025 compared to the same period of 2023, while the contribution of investment increased.<\/p>\n
“While the contribution of net exports turned negative during this period amid global trade uncertainties of 2025, there is a more balanced picture compared to the pre-tightening period,” he added.<\/p>\n
The governor also said that demand conditions “continue to support the disinflation process, albeit to a lesser extent,” and that they expected this disinflationary outlook to last in 2026.<\/p>\n
Monetary stance<\/p>\n
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