TOKYO- The Bank of Japan is shifting to a more discretionary approach in setting policy, with less emphasis on inflation, sources said, as the central bank maps its monetary path following the historic decision to end a radical stimulus program in March.
With monetary settings seen on hold, market players are focusing on the BOJ’s fresh quarterly growth and price projections due at its April 25-26 policy meeting, for hints on how soon it may hike rates again.
While the central bank is expected to project inflation to stay around its 2 percent target through early 2027, such forecasts alone won’t serve as strong hints of a near-term rate hike, say three sources familiar with its thinking.
“Various data must be scrutinized, not just the inflation outlook,” one of the sources said, pointing to the importance of other indicators such as consumption, wages and the broader economy.
BOJ officials, including governor Kazuo Ueda, have said the focus would be on whether wage increases will broaden, and prod firms to hike prices not just for goods but services.
The BOJ ended eight years of negative rates and other remnants of its unorthodox policy last month, making a historic shift away from its focus on reflating growth with decades of massive monetary stimulus.
Many market players expect the BOJ to hike rates again this year with bets split between the chance of action in July, or sometime in the October-December quarter.
In the days after ending negative rates in March, Ueda said the central bank would revert to a “normal” monetary policy that lets various data guide the future rate hike path.
