BoJ Governor Ueda signals gradual rate hikes as Japan's economy recovers

Bank of Japan (BoJ) Governor Kazuo Ueda stated on Tuesday that Japan's economy is experiencing a moderate recovery, though some weaknesses persist. He noted that the underlying inflation rate is nearing 2%, a key benchmark for the central bank. According to Ueda, the September tankan survey reflected strong business sentiment, and financial conditions remain accommodative, even after the recent rate hike in September.

Ueda emphasized that the BoJ will continue to raise interest rates gradually, aligning with economic, price, and financial developments. He stressed the importance of anchoring inflation around 2% to ensure long-term stability. The governor indicated that future policy adjustments will depend on the likelihood of the BoJ's baseline projections materializing, as well as associated risks.

The market reaction to Ueda's remarks was relatively muted, with the USD/JPY pair rising slightly by 0.18% to 158.20 at the time of writing. Analysts noted that Ueda's speech maintained a consistent tone, reinforcing expectations of a slow but steady normalization of monetary policy. The emphasis on gradual rate increases and inflation targeting provided medium-term support for the yen, though it limited immediate volatility.