Ueda, BOJ Governor: "Risk of Inflation Exceeding 2%"... Signals Further Rate Hike

Underlying inflation has largely reached the 2% target
警惕 inflation could exceed the target
Reaffirms intention to maintain the "rate-hike" stance

Kazuo Ueda, governor of the Bank of Japan (BOJ), said the decision to keep the benchmark interest rate unchanged reflected the assessment that inflation had reached the 2% target, but expressed concern that it could exceed that level going forward. He also reaffirmed the BOJ’s intention to continue raising interest rates, as keeping inflation around 2% has become increasingly important.

At a press conference on October 30 after the Monetary Policy Meeting, Ueda said, “Underlying inflation is at a level consistent with the 2% target and is expected to remain around that level going forward.” He added that all nine Policy Board members agreed with the assessment that inflation was consistent with the 2% target.

Bank of Japan (BOJ) Governor Ueda Kazuo speaks at a press conference following a BOJ policy meeting in Tokyo, Japan, on the 30th. Tokyo, Japan = Reuters-Yonhap.

This is interpreted as meaning that underlying inflation has generally reached the BOJ’s 2% target, which it has pursued since 2013 through highly accommodative monetary policy. To escape deflation, the BOJ sought to drive up prices, including through large-scale government bond purchases, beginning under former Governor Haruhiko Kuroda. Now, however, the BOJ needs to be wary of inflation exceeding the 2% target amid domestic and external economic conditions, including rising energy prices due to the situation in the Middle East and wage increases.

“Going forward, it will be important to stabilize inflation at around 2%,” Ueda said, assessing that the risks to the inflation outlook were tilted to the upside rather than the downside. He added, “Upside risks remain high, but they have not increased significantly compared with a month ago.”

He also reaffirmed the BOJ’s intention to continue raising interest rates in light of these conditions. “We will continue to raise the policy rate and adjust the degree of monetary easing,” he said. He did not specify the timing or pace of future increases, adding that the BOJ would make its decisions after assessing the effects of exchange rate fluctuations and other factors on the economy and prices.

Regarding the decision to keep rates unchanged, he said it was made because “we determined that we needed to monitor risks surrounding the economic and price outlook, as well as financial conditions, more closely.” The BOJ raised its policy rate to 1.25% per year in September and decided at its meeting on October 30 to leave it unchanged.

This content was produced with the assistance of AI translation services.