BOJ Governor Ueda Signals More Rate Hikes to Anchor Inflation at 2%

Bank of Japan (BOJ) Governor Kazuo Ueda emphasized the need to anchor underlying inflation around the central bank’s 2% target, hinting at further interest rate hikes to manage rising inflation. His remarks came ahead of the BOJ’s upcoming policy meeting, set to conclude on October 30, where new economic forecasts will be released. Ueda noted that economic and price trends align with the BOJ’s projections, with moderate recovery and strong business sentiment reported.

Ueda highlighted that rising raw material costs are driving wholesale inflation, with consumer inflation also increasing. Long-term inflation expectations continue to grow, but he cautioned about the risk of overshooting the 2% target due to factors like the US-Israeli war on Iran, strong AI-driven demand, and a weak yen. He assured that financial conditions remain supportive of economic activity, even after the recent rate hike, and signaled continued adjustments to borrowing costs to align monetary policy with economic conditions.

In a statement following September’s rate hike, the BOJ had stated the importance of anchoring inflation around its target. The recent rate increase marked a 31-year high, with Ueda indicating a shift toward preventing inflation from exceeding the target, suggesting tighter monetary policy in the future.