Bank of Japan's Policy Response Function Has Changed, Yen Weakness Becomes Key to Rate Hikes

Gate News message, April 28 — The Bank of Japan may take action as the yen weakens significantly, with the central bank stating in a recent report that it will continue raising rates based on economic, price, and financial conditions. Strategist Naomi Mugurama from Mitsubishi UFJ Morgan Stanley Securities noted that this marks a shift in the Bank of Japan’s policy response function.

The Bank of Japan indicated that foreign exchange rates are increasingly likely to influence prices, and such fluctuations may affect underlying inflation by changing inflation expectations. While the central bank does not directly target the yen, it may adjust policy if yen depreciation significantly accelerates price increases.