BOJ Governor Ueda Warns of Inflation Risks, Hints at More Rate Hikes

Bank of Japan Governor Kazuo Ueda emphasized the need to stabilize inflation around the central bank's 2% target, indicating a potential for further interest rate hikes. His comments came ahead of a key policy meeting scheduled for late October, where new economic and inflation forecasts will be released.

Ueda noted that economic conditions and price trends are aligning with the BOJ's projections, with moderate recovery and strong business sentiment. However, he cautioned about rising wholesale inflation due to higher raw material costs and its spillover into consumer prices, alongside increasing long-term inflation expectations.

The governor highlighted risks of inflation overshooting the target due to geopolitical tensions, strong demand from AI-related sectors, and the weak yen. He reassured that financial conditions remain supportive of economic activity, despite the recent rate hike, and that further adjustments to borrowing costs are necessary to balance monetary policy.

Ueda's remarks suggest a shift in the BOJ's focus towards preventing excessive inflation, a stance reinforced by the recent rate increase to a 31-year high. The central bank's next move will be closely watched for signals on the timing and magnitude of future rate adjustments.