Bank of Japan (BoJ) Policy Board Member Junko Koeda stated that it is appropriate to address inflation through monetary policy, emphasizing that inflationary risks are already materializing in Japan. Koeda noted that while there is some time before the June policy meeting, the central bank will continue to monitor any changes in the balance between price and growth risks before making further decisions. She highlighted that the risk of inflation overshooting is currently greater than the risk of recession, and personally believes that the bottom of Japan's estimated neutral rate is higher than 1% [1].
Koeda also commented on the economic outlook, stating that a sharp deterioration in the economy is not expected, but acknowledged that the view could change depending on developments in the Middle East conflict [1].
In terms of market reaction, the USD/JPY currency pair was down 0.03% on the day, trading at 158.88 at the time of reporting [1].
The BoJ has recently shifted away from its ultra-loose monetary policy, having lifted interest rates in March 2024 in response to rising inflation, a weaker yen, and increasing salaries. The central bank's decisions have historically influenced the yen's value, with previous stimulus measures leading to depreciation, and the recent policy shift contributing to a partial reversal of this trend [1].
CONCLUSION
BoJ’s Koeda’s remarks reinforce the central bank’s readiness to use monetary policy tools to address inflation, with a focus on monitoring economic risks ahead of the June meeting. The market response was muted, as reflected in the slight movement of USD/JPY. The BoJ’s evolving stance signals continued vigilance as inflation risks remain elevated.