It appears that Bank of Japan is feeling that the Japanese economy has jumped the deflation hurdle. From the Wall Street Journal:
Japan's central bank relaxed the targets set for extra cash in the financial system Friday, a move that indicates a tentative step toward tighter monetary policy amid signs of a gradual economic recovery.
The Bank of Japan policy board voted at the end of a two-day meeting to allow the amount of liquidity pumped into the system to temporarily fall below the bank's target range if necessary...
Some economists say the move is an initial step on a long path toward tightening of monetary policy as Japan's economy slowly recovers and deflation pressures gradually ease...
There are some signs that Japan may be headed toward a steady recovery as consumer spending picks up and exports propel growth. The economy recorded its strongest pace of expansion in a year during the January-March quarter, although officials warn against too much optimism.
Later Friday, the Bank of Japan left its overall core economic assessment in May unchanged from April, repeating that the nation's recovery continues. But the central bank in its monthly report upgraded its assessment on industrial production, saying output is increasing. Last month, it had said industrial production remained flat.
"Today's move can be regarded as a historical first step toward changing the direction of the monetary-policy trend," said Masaaki Kanno, chief Japan economist at J.P. Morgan in Tokyo.
But Mr. Kanno and other analysts say it may take a while for the Bank of Japan to take more definitive action like raising interest rates...
Bank of Japan Gov. Toshihiko Fukui denied the central bank was shifting gears, while affirming that the Japanese economy is making a turnaround. "We haven't changed the basic policy framework," Mr. Fukui said.
Can we be sure about that? Back in the old days, when people in the United States were worried that the inflation rate wasn't high enough, Ben Bernanke and Vincent Reinhart summarized the professional consensus on how to conduct monetary policy when short-term interest rates are very low:
... a central bank may hope to affect financial markets and economic activity by influencing financial market participants' expectations of future short-term rates. Important recent research has examined this potential channel of influence in fully articulated models based on optimizing behavior; see Michael Woodford (2003, chapter 6), Lars Svensson (2001), and Gauti Eggertson and Woodford (2003). This literature suggests that, even with the overnight nominal interest rate at zero, a central bank can impart additional stimulus by offering some form of commitment to the public to keep the short rate low for a longer period than previously expected. This commitment, if credible, should lower yields throughout the term structure and support other asset prices.
In other words, the expectation that interest rates will be raised is often the same thing as actually raising them. It seems to me like the answer to the question posed in the title of this post is "yes."
NOTE: Here are the articles referenced in the Bernanke-Reinhart passage:
Eggertsson, Gauti and Woodford, Michael. "The Zero Bound on Interest Rates and Optimal Monetary Policy." Brookings Papers on Economic Activity, 2003, (1), pp. 139-233.
Svensson, Lars E. O. "The Zero Bound in an Open Economy: A Foolproof Way of Escaping from a Liquidity Trap." Monetary and Economic Studies, Special Edition, February 2001, 19, pp. 277-312.
Woodford, Michael. Interest Rates and Prices: Foundations of a Theory of Monetary Policy. Princeton, NJ: Princeton University Press, 2003.
UPDATE: In the original post one of the paragraphs was mysteriously misplaced. This is an edited version that corrects the goof.