The Bank of Japan has shifted its view on inflation risk for the first time since 2014, driving the yen lower as a nation that has battled deflation for decades faces the mounting pressure of price rises in food and energy.
Despite the historic change of view, the BoJ made no change to its monetary stance on Tuesday, opting to keep its negative interest rate, asset purchases and yield curve control policies unchanged.
The BoJ revised its inflation projection upward from 0.9 per cent to 1.1 per cent for the fiscal year starting in April. The central bank, which said that a pick-up in Japan’s economy had become “evident”, also changed its price risk assessment from “skewed to the downside”, an expression that had been used since October 2014, to “generally balanced”.