BOJ governor signals further rate hikes

Bank of Japan (BOJ) Governor Kazuo Ueda signalled on Wednesday that further interest rate hikes could be on the horizon as the central bank seeks to balance economic growth with rising inflation pressures.

In his post-policy meeting press conference, Ueda said rising prices may have impacted consumption, but it remains stable. Household sentiment is improving, and wage data indicates increasing pay.

Surveys suggest wage hikes are expanding among smaller firms, which is expected to support consumption and inflation, Ueda added.

Regarding inflation, Ueda noted that the central bank is closely monitoring the impact of the weak yen on import prices and the risk of an inflation overshoot.

Despite the rate hike, he emphasised that real interest rates remain low and that the policy adjustment is unlikely to significantly impact the overall economy.

The BOJ governor reiterated the central bank’s commitment to gradually adjusting monetary policy, emphasising the need to avoid abrupt changes.

“There is still a lot of uncertainty on where Japan’s natural rate of interest is. What we can say is that short-term rates are still pretty much below levels that could raise questions about whether we’re close to the neutral level,” he added.

Attribution: Reuters