BOJ Policy Shift: Preventing Inflation Overshoot Now a Top Priority

The Bank of Japan's September meeting summary revealed a shift in policy phase, with preventing inflation overshoot now considered as important as boosting prices. Despite this hawkish stance, the yen failed to gain traction, and USD/JPY edged up by roughly 0.2% to around 157.70.

The committee members agreed that monetary policy is undergoing a transitional phase, from focusing on escaping deflation and lifting inflation to preventing inflation from deviating excessively from its target. Governor Kazuo Ueda emphasized that the situation has changed, with underlying inflation gradually approaching 2%, and the policy focus has shifted from simply boosting inflation to ensuring stability.

The interest-rate hike path shows some divergence among committee members, but remains broadly hawkish. Some members favor accelerating the pace of rate increases if inflation were to show signs of moving upward, while others argue that the policy rate should converge relatively quickly to its target level.