The Bank of Japan’s policy board meets on March 18–19 with the overnight rate at 0.75%, the highest in thirty years. The market expects a hold. The decision itself is not the story. The language is. Two forces are pulling in opposite directions, and the words the BOJ chooses to describe the balance between them will determine whether April remains a live meeting or whether the next hike slips to June or beyond. ...
Between 1995 and 2021, Japan’s average annual inflation rate was approximately 0.2%. For an entire generation, prices were essentially flat or falling. This was not a neutral condition. Deflation corroded the economy from the inside, suppressing wages, discouraging investment, rewarding cash hoarding, and keeping equity valuations perpetually depressed. That era is over. As of December 2025, Japan’s core consumer price index — excluding fresh food but including energy — had remained above the Bank of Japan’s 2% target for 45 consecutive months. The headline CPI averaged 3.2% for calendar year 2025, according to Japan’s Statistics Bureau. Even the “core-core” measure excluding both food and energy — the closest proxy for domestically generated inflation — has been running above 2% for over three years. ...