Japan’s economy is at a monetary turning point: after years of ultra-low rates and weak wage growth, the Bank of Japan now faces pressure from a weaker yen, rising energy and food costs, higher JGB yields, and improving wage dynamics. This article analyzes how these forces have evolved from 2020 to 2026 and argues that Japan’s policy normalization is no longer driven by inflation alone, but by the combined pressure of currency weakness, bond-market repricing, imported inflation, and the growing difficulty of maintaining deeply negative real interest rates.

May, 18, 2026