Bank of Japan Declares Inflation Win, Clearing Way for Rate Hikes - WSJ

The Bank of Japan has declared victory over deflation, according to the Wall Street Journal, a symbolic shift that clears the way for further interest-rate increases. The declaration matters because it formally retires the deflation-era mindset that has anchored Japanese monetary policy for decades, giving policymakers more room to normalize rates without appearing to abandon their core mandate.

For markets, the signal is as important as any single move. Higher Japanese rates could gradually narrow the yield gap that has made the yen a funding currency for global carry trades, with potential ripple effects across currency, bond and equity markets. Japanese government bond yields and the yen are the first places to watch; sustained moves there could influence borrowing costs and cross-border capital flows more broadly.

What to watch next: the pace and size of any actual rate increases, the BoJ's language on future policy, and how global bond markets absorb a Japan that is slowly stepping back from ultra-loose conditions. The declaration is a milestone, not a guarantee of a fast tightening cycle.