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Policy Board member Junko Koeda stated that the central bank’s role in fighting inflation is stronger now than it was before. With Japan’s core inflation hovering close to 2% and headline CPI running around 3%, the BOJ is no longer trying to coax prices upward. It’s trying to keep them from running away.
From deflation fighter to inflation hawk
Japan’s inflation peaked at 4.2% in early 2023, then settled into a range between 2% and 3%. The BOJ responded by dismantling its ultra-loose framework in 2024, delivering its first rate hike since 2007.
As of March 2026, the BOJ’s short-term policy rate sits at 0.75%, the highest level since September 1995.
The mechanics of the pivot
Beginning in June 2025, the central bank initiated a systematic reduction in its Japanese government bond (JGB) purchases. The target is to taper those purchases down to approximately 2 trillion yen per month by the first quarter of 2027.
The yield-curve control policy has been scrapped entirely.
Koeda’s comments signal that the BOJ plans to continue adjusting the degree of monetary accommodation based on how the economic outlook and inflation trends evolve. The goal is sustainable price stability, not a one-time correction.
What this means for investors
The BOJ learned a painful lesson in the summer of 2024 when a rate hike contributed to a sharp global selloff, with the yen carry trade unwinding violently. Koeda’s emphasis on adjusting policy based on economic conditions suggests the central bank is trying to avoid a repeat of that episode.
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