The Bank of Japan held a monetary policy meeting and indicated that underlying inflation had effectively reached 2%, while the policy rate is expected to remain at its current level. The Bank is entering a phase of seeking an appropriate response on the assumption that elevated prices will persist.
The Bank of Japan held a monetary policy meeting and was reported to be expected to indicate that underlying inflation had reached 2%, while factors pushing up prices remained. At the meeting, the policy rate was expected to be left unchanged while the effects of the most recent rate hike were assessed.
External factors cited as drivers of higher prices have included a wide range of developments, such as the COVID-19 pandemic and the situation in Ukraine. Bank of Japan officials are taking a measured view, saying that the Bank has “merely reached the starting line.” At the same time, some have pointed out that elevated prices caused by developments in the Middle East and other factors will persist, and a response through rate hikes is expected for the time being.
The Bank of Japan is expected to pursue a direction that avoids large fluctuations in prices and establishes stability at around 2%. The Bank faces an unprecedentedly difficult policy challenge, and its policy management is attracting attention.
Market attention has consequently focused on when the price stability target will be achieved and the direction of policy management thereafter.