BoJ Board Member Takata says fears of Japan's economy returning to deflation have been dispelled and believes it's necessary to move the BoJ's focus more to upswing in prices

• Overseas economies have grown moderately on the whole, although some weakness seen.
• Even after December rate hike, real short term interest rates have been significantly negative in Japan.
• Proposed a rate hike in January on the view that BoJ must continue adjusting real interest rates, which remain significantly lower than the rates seen overseas.
• Must conduct further rate hikes in a gradual manner.
• BoJ should take time and be prudent in reducing its JGB purchases
• Price increases now have a greater tendency to generate second-round effects
• Must carefully monitor divergence in monetary policy stances between Japan and abroad, particularly for FX volatility
• Need to consider a response for the bond market in exceptional cases
• BoJ should make a further “gear shift” on rates and communicate on the assumption its price target is almost achieved

BoJ Board Member Takata's remarks signal a potential shift in Japan's monetary policy focus towards addressing inflation, suggesting that deflation fears are alleviating. His proposal for a rate hike emphasizes the need to gradually adjust real interest rates in response to rising prices, indicating a growing awareness of overseas economic conditions. This shift could impact the JPY and bond markets, emphasizing the importance of monitoring global monetary policy divergences, particularly for FX stability.