Bank of Japan board member Junko Koeda said monetary conditions remain accommodative and that policy may need adjusting to contain upside inflation risks. She said the neutral rate should be considered within a range, while also indicating she sees it above 1% and has no specific pace of rate rises in mind. Koeda added that underlying inflation is stabilising around 2%, and that the pass-through of costs to prices has tracked the central bank’s July baseline scenario. She said policy would be adjusted so underlying inflation does not exceed 2%, and that the September rate rise reflected extra data pointing to an economy that remains resilient.
Market Reactions
Markets showed little reaction, with USD/JPY 0.25% lower at around 157.90.
BoJ Policy Approach And Background
The BoJ’s mandate centres on price stability, with an inflation target around 2%. It launched ultra-loose policy in 2013 via Quantitative and Qualitative Easing, then added negative rates and control of the 10-year yield in 2016, before lifting rates in March 2024 to step back from that stance. Previous stimulus weakened the yen through rate differentials versus other central banks, a move that partly reversed in 2024 as the BoJ began unwinding.
