While imported inflation will lift underlying inflation to 3.5% by early next year, government subsidies to electricity prices will push headline inflation below 2% by Q2 2023. Indeed, the Bank of Japan isn't convinced that above-target inflation will be sustained. And with the global downturn dragging Japan’s economy into recession, the window for policy tightening is closing. Accordingly, we expect the Bank to keep its short-term policy rate at -0.1% for the foreseeable future, though the appointment of a dovish successor for current Governor Kuroda could prompt the Bank to abandon Yield Curve Control altogether.