BOJ Governor Ueda Warns of Inflation Risks Ahead of Rate Decision

Bank of Japan Governor Kazuo Ueda emphasized the need to anchor underlying inflation around the central bank's 2 percent target, hinting at further rate hikes to curb excessive inflation. His remarks came ahead of the BOJ's two-day policy meeting ending on October 30, where updated growth and inflation forecasts will be scrutinized for hints on future rate adjustments.

Ueda noted that economic and price trends align with the BOJ's forecasts, with moderate economic recovery and positive business sentiment reflected in the central bank's 'tankan' survey. Rising raw material costs are driving wholesale inflation, which is spreading to consumer prices, while long-term inflation expectations continue to climb.

The governor warned of potential risks, including overshooting the inflation target due to geopolitical tensions, strong AI-related demand, and the weak yen. He reassured that financial conditions remain supportive of economic activity despite last month's rate increase, emphasizing the need to adjust monetary support levels to prevent inflation from damaging the economy.

In September, the BOJ raised its key rate to a 31-year high, signaling a shift toward tighter policy to prevent underlying inflation from surpassing its target.