The BOJ is considering assessing underlying inflation as having reached around 2% and may reflect this in its Outlook Report. Attention is focused on the relationship between the Takaichi administration’s move away from reflation policies and the BOJ’s assessment.
The BOJ has begun considering whether to indicate that underlying inflation has reached around 2%, and has reportedly decided to reflect this in the Outlook Report for the Monetary Policy Meeting to be held on the 29th and 30th of this month. In response, overseas media also reported similar information that day, prompting observations that the assessment may be brought forward.
One view is that, as inflation expectations rise under the impact of higher prices caused by rising crude oil prices and a weaker yen, and as the BOJ remains alert to inflation risks, it will position its recognition that inflation has reached 2% as a basis for justifying policy normalisation.
Meanwhile, the question of how the BOJ’s assessment will affect the administration’s efforts to move away from reflation policies has become a point of debate. The focus of discussion is on the BOJ’s assessment of the past unconventional monetary easing and how to justify the policy shift.
Regarding developments surrounding the remarks of Policy Board Member Sato (佐藤), a view was presented that policy rates should be raised gradually while maintaining the current accommodative financial environment. These developments encourage the interpretation that internal and external movements surrounding the BOJ are linked.
Monetary policy is expected to take an increasingly cautious approach to assessing the effects on the economy and stock market while containing inflation, and the pace of rate hikes may change significantly depending on external shocks.