It has been reported that the Bank of Japan shifted to a policy of stabilizing underlying inflation at around 2%, with the minutes of its Monetary Policy Meetings and the history of past rate hikes compiled and reviewed.
Jiji Press reported that the Bank of Japan had entered a phase focused on stabilization after bringing the "underlying rate of inflation" to around 2%. Based on the minutes of the July and September Monetary Policy Meetings, the article explains that debate had advanced over the need for Japan's monetary policy to respond flexibly to rate-hiking cycles overseas.
Although the Bank of Japan had refrained from raising rates since 2022 despite consumer prices excluding fresh food rising above 2%, it raised the uncollateralized overnight call rate to 0%-0.1% in March 2024, ended negative interest rates and reviewed its control of long-term interest rates. Rates were subsequently raised in stages, reportedly reaching 1.25% in September 2026.
The article reports that Governor Ueda (植田氏) expressed the view that "the phase of policy has changed," while emphasizing the Bank of Japan's intention to establish inflation at around 2%. The Bank is considered highly likely to acknowledge that the 2% level has been reached in its Outlook for Economic Activity and Prices, and is expected to continue signaling a policy of advancing rate hikes at short intervals.
The Bank of Japan's definition of underlying inflation itself is not clear, and some have pointed to delays in policy normalization. Although its response has been assessed as slower than the aggressive rate hikes in Europe and the United States, attention will now focus on its cautious approach to containing yen depreciation and avoiding a sharp rise in long-term yields.