Bank of Japan policy board member Koeda says underlying inflation already around 2%

BOJ policymaker Koeda: Inflationary risk is already materialising

BOJ's Himino reaffirms rate hike path with Middle East risk the key caveat

BOJ policymaker Masu warns that yen depreciation may raise inflation expectations

The desk views the recent commentary from BOJ policymaker Masu as a critical signal regarding the potential for yen depreciation to elevate inflation expectations in Japan. Per the full note [source], Masu highlighted the risks associated with rising inflation expectations that could stem from a weaker yen, emphasizing the need for the BOJ to maintain a vigilant policy stance. This aligns with our assessment that the BOJ may need to adjust its policy rate in response to evolving economic conditions, particularly as Japan grapples with inflationary pressures that have emerged more prominently than in previous decades. Current market sentiment reflects a cautious approach, with traders anticipating potential policy shifts in the near term.

BOJ March minutes says rates will be raised in line with improvements in economy, priced

The desk interprets the Bank of Japan's March minutes as indicative of a growing internal debate regarding the urgency of rate hikes, particularly in light of rising inflation risks tied to geopolitical tensions. The BOJ's 8-1 vote to maintain rates at 0.75% reflects a cautious approach, but the minutes reveal a significant concern about falling behind the curve on inflation, especially with the Iran conflict driving up oil prices. Per the full note [source], the board's discussions suggest that further rate increases are likely if economic conditions and inflation expectations evolve as anticipated. This aligns with our view that the BOJ may need to act sooner than previously expected to maintain price stability.