Bank of Japan Expected to Assess 2% Inflation Goal Next Week

The Bank of Japan is expected to assess at next week's policy meeting whether underlying inflation has reached its 2% target, a judgment that could shift expectations for Japanese interest rates and the yen.

A finding that the underlying price trend has reached 2% would mark a milestone for Japan’s central bank after years of monetary easing aimed at ending deflation. The assessment concerns whether inflation has met the bank’s long-standing goal; it does not mean the bank has already reached that conclusion.

The bank adopted its 2% inflation target in January 2013. Despite an aggressive easing program, it repeatedly pushed back the point at which it expected to meet the goal. A positive assessment would come nearly 14 years after the target was introduced.

For US markets, the bank’s view matters because expectations for Japanese rates and the yen can influence trading beyond Japan. The immediate question is how officials judge the inflation trend at next week’s policy meeting.