Overview
- Deputy Governor Ryozo Himino said policy should move toward neutral through moderate rate increases, with decisions guided by incoming data.
- He said underlying inflation is rising but not yet decisively at 2%, and emphasized that a headline dip below target would not automatically preclude a hike.
- Fresh Middle East turmoil jolted markets, pulling two‑year JGB yields lower, lifting oil prices, and weakening the yen, which complicates the near‑term policy calculus.
- Market pricing now assigns a low probability to a March move and higher odds for April, after BOJ officials offered no clear signals of an imminent hike.
- The BOJ lifted its key rate to 0.75% in December and continues to signal further normalization, even as a pro‑stimulus government and new dovish board nominees narrow its room to tighten.