Inflation in Japan Is Finally Rising, but the BOJ Will Take It Easy With Monetary Policy

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In Japan, where prices have been roughly flat for decades, inflation is finally taking off. But unlike the Federal Reserve in the U.S., the Bank of Japan has resolved to keep interest rates low, helping drive a fall in the yen, the Wall Street Journal reported. On Thursday, the Japanese central bank resumed another bond-buying move aimed at keeping a lid on rates. It promised to purchase unlimited quantities of government bonds to cap the yield at 0.25%—less than one-tenth the return on the equivalent U.S. Treasury bonds. The notice of intent, which lasts until Tuesday, was enough to push the yield below the cap without any actual purchases Thursday. The Bank of Japan’s unusual stance has propelled the yen to its weakest level against the dollar in two decades, jumbling the calculus that underpins hundreds of billions of dollars in annual trade and investment flows between Japan and the U.S. The weak yen is one reason prices are rising in Japan, with consumer-price inflation expected to approach the central bank’s longstanding 2% target in the next month or two. Japan is paying more in yen terms for imports such as oil and food, while global energy shortages and supply-chain bottlenecks also push prices higher. Read more.