The Bank of Japan (BoJ) remains open to further interest rate hikes, provided its economic and inflation forecasts materialize, according to the minutes from its March 18–19 policy meeting released Thursday. The document reflects a cautiously optimistic stance among board members, though uncertainty around U.S. economic policy looms large.
BoJ policymakers broadly agreed that the central bank should continue raising rates if the current trajectory for growth and inflation persists. Several members, however, struck a more measured tone, emphasizing the need to closely monitor the global impact of new U.S. policy directions—particularly given the heightened downside risks stemming from them.
One board member warned that the timing of the next rate hike would require particular caution, while another argued that excessive caution may not be justified even in the face of uncertainty, suggesting there could be moments when decisive policy action is needed.
The minutes also indicated internal discussions on maintaining flexibility. One member highlighted the importance of being able to adjust the degree of monetary support quickly, especially to prevent financial overheating. Another said that during the next phase of tightening, Japan’s core consumer price inflation could approach the BoJ’s 2% target—an important threshold for policy normalization.
On asset purchases, one member noted there was no immediate need to alter the BoJ’s bond tapering strategy ahead of the upcoming policy review in June. However, the same official stressed the importance of evaluating the long-term reduction plan scheduled to begin in April 2026.
In the context of global monetary policy, one board member observed that the U.S. Federal Reserve’s patient stance allowed the BoJ more room for flexibility in setting its own course.
Market Reaction:
The hawkish tilt in the BoJ’s minutes lent modest support to the Japanese Yen (JPY), helping it hold firm against the U.S. Dollar. The USD/JPY pair remained under the 144.00 level in Thursday trading, as investors weighed the potential for BoJ tightening against a backdrop of ongoing global trade uncertainty.
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