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

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