Bank of Japan (BoJ) Governor Kazuo Ueda affirmed on Wednesday that the central bank will continue raising interest rates if Japan’s economic and price developments follow the projections outlined in its quarterly outlook report.
Key Remarks:
Ueda acknowledged that Japan’s economy is recovering moderately but still faces some weaknesses.
He forecasted that Japan’s economy will continue growing above its potential, with underlying inflation gradually accelerating.
While current inflation remains high, largely due to past import cost increases and recent food price hikes, Ueda expects these cost-push factors to diminish over time.
He stated that Japan’s underlying inflation is still somewhat below the 2% target but is likely to converge toward it, even as food price increases temporarily subside.
Ueda emphasized that the BoJ will assess multiple indicators, not just one, to determine when underlying inflation meets the target, cautioning that food price fluctuations alone should not trigger a change in monetary policy.
He also noted that if food inflation leads to broader price increases, especially in services, the BoJ may consider further interest rate hikes.
Market Reaction: Following Ueda’s comments, the USD/JPY pair saw a modest increase, up 0.07% on the day, reaching 150.20.
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