BoJ Downplays Behind-the-Curve Risk: January Meeting Summary

2026-02-02 01:18 By Farida Husna 1 min. read

The Bank of Japan’s risk of falling behind the curve has not increased markedly, a summary of opinions at its January meeting showed.

Still, careful and timely policy execution is seen as increasingly vital.

With real interest rates still deeply negative, and assuming the central bank’s outlook for activity and prices holds, further rate hikes are considered appropriate.

The board is gauging each move’s impact on growth, inflation, and financial conditions, pursuing gradual tightening, though policy remains highly accommodative amid yen weakness Underlying inflation has moved closer to the 2% target, supporting the case for continued adjustments.

Looking ahead, shifts in overseas rate environments could heighten the risk of lagging policy.

Japan’s real policy rate remains the lowest globally, and forex markets’ sensitivity to rate differentials underscores the need to narrow the gap.

Yen weakness and rising yields largely reflect fundamentals, leaving timely hikes as the key response.



News Stream
BoJ Downplays Behind-the-Curve Risk: January Meeting Summary
The Bank of Japan’s risk of falling behind the curve has not increased markedly, a summary of opinions at its January meeting showed. Still, careful and timely policy execution is seen as increasingly vital. With real interest rates still deeply negative, and assuming the central bank’s outlook for activity and prices holds, further rate hikes are considered appropriate. The board is gauging each move’s impact on growth, inflation, and financial conditions, pursuing gradual tightening, though policy remains highly accommodative amid yen weakness Underlying inflation has moved closer to the 2% target, supporting the case for continued adjustments. Looking ahead, shifts in overseas rate environments could heighten the risk of lagging policy. Japan’s real policy rate remains the lowest globally, and forex markets’ sensitivity to rate differentials underscores the need to narrow the gap. Yen weakness and rising yields largely reflect fundamentals, leaving timely hikes as the key response.
2026-02-02
BoJ Board Eyes Further Hikes: December Minutes
The Bank of Japan’s December minutes showed board members favored continued rate hikes if the outlook for growth and prices holds, while keeping an overall accommodative stance. They judged the economy had recovered moderately, though manufacturing profits faced pressure from U.S. tariffs. Still, the impact had not spread broadly to investment, jobs, or wages. Exports and industrial output were seen as flat, while private consumption remained resilient, supported by income and employment gains, though higher prices weighed somewhat. On inflation, most members expected core CPI to slow below 2% through the first half of fiscal 2026 as food costs ease and government measures curb price pressures. They agreed financial conditions would stay accommodative even with a 0.75% policy rate, noting real rates remain deeply negative. Most stressed policies should be decided on a meeting-by-meeting basis, without a preset pace, based on careful assessment of economic, price, and financial trends.
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