BOJ’s governor signals potential rate hikes

The Bank of Japan (BOJ) governor Kazuo Ueda hinted at a potential shift in monetary policy on Wednesday, suggesting interest rate hikes could be on the table if the weakening yen continues to push up prices, Reuters reported.

Ueda’s comments, following a meeting with Prime Minister Fumio Kishida, mark a change in tone from his previous stance.

He acknowledged the growing risk of currency volatility fueling inflation, particularly as businesses consider raising prices and wages.

“We need to be mindful of the risk that the impact of currency volatility on inflation is becoming bigger than in the past,” Ueda told parliament.

This shift comes after the yen hit a 34-year low against the dollar in late April. Japanese authorities are believed to have intervened in the market to support the currency, spending billions of dollars in the process.

Ueda also signaled the BOJ’s openness to raising rates sooner than anticipated if inflation rises faster than expected.

The central bank is aiming for a two per cent inflation target, and Ueda expressed confidence that trend inflation is progressing towards that goal.

The BOJ recently ended its negative interest rate policy, a key component of its ultra-loose monetary stimulus. Market analysts widely anticipate further rate hikes from the current near-zero levels later this year.