Bank of Japan Governor Kazuo Ueda emphasized the need to anchor underlying inflation around the central bank’s 2% target, signaling a readiness to continue raising interest rates. His remarks came ahead of the BOJ’s two-day policy meeting ending on Oct. 30, where new quarterly growth and inflation forecasts will be scrutinized for hints about the next rate hike.
Ueda noted that economic and price developments align with the BOJ’s forecasts, with the economy recovering moderately and business sentiment remaining solid. He highlighted rising raw material costs driving wholesale inflation, which is spreading to consumer prices. Long-term inflation expectations are also on the rise, he added.
Ueda warned of risks that underlying inflation could overshoot the 2% target due to factors like the U.S.-Israeli war on Iran, strong AI-related demand, and the weak yen. He stated that financial conditions remain accommodative, supporting economic activity even after last month’s rate hike. The BOJ will continue adjusting borrowing costs to manage monetary support levels.
The BOJ raised its key rate to a 31-year high in September, marking the start of a phase focused on preventing inflation from exceeding its target. Ueda’s latest comments underscore the central bank’s commitment to tighter policy if necessary to ensure price stability.