The Bank of Japan's internal demands to abandon the vague inflation target pave the way for interest rate hikes

ChainCatcher news reports that, according to analysis from foreign media cited by Jinshi, the pressure within the Bank of Japan to abandon a vaguely defined inflation indicator is increasing. Previously, Bank of Japan Governor Kazuo Ueda stated that "underlying inflation" (which mainly focuses on the strength of domestic demand and wages) remains below the central bank's 2% target, providing justification for gradual interest rate hikes. The issue is that there is no single metric to measure "underlying inflation," making it a target for critics.

Critics argue that both overall inflation and core inflation indicators have exceeded the target for years, but the Bank of Japan has overly relied on a vague indicator to guide monetary policy. Now, even some members of the Bank of Japan's policy board are calling for the central bank to change its communication approach, shifting towards a more hawkish stance that focuses on the overall inflation rate. Senior observer of the Bank of Japan, Naomi Muguruma, stated that the central bank may gradually remove the concept of "underlying inflation" from its policy communication in preparation for the next possible interest rate hike as early as October.