Institution: Bank of Japan's "Policy Reaction Function" Has Changed, Yen Movement Becomes Key to Rate Hikes

Odaily reported that a significant depreciation of the yen could prompt the Bank of Japan to take action, as the central bank indicated in a report that it will continue to raise interest rates based on economic, price, and financial conditions. Naomi Rokkusha, a strategist at Mitsubishi UFJ Morgan Stanley Securities, stated that this marks a change in the Bank of Japan's "policy reaction function." In the report, the BOJ said that foreign exchange rates are increasingly likely to influence prices, and such fluctuations could affect underlying inflation by altering inflation expectations. While the Bank of Japan does not directly target the yen, it may adjust policy if a sharp depreciation of the yen significantly accelerates price increases. (Jin Shi)