Bank of Japan Governor Kazuo Ueda said the central bank will keep raising interest rates and focus on anchoring underlying inflation around its 2% target. The BOJ may face pressure to hike faster as global inflationary pressures build, while many in the BOJ reportedly prefer to wait at the October meeting.
Bank of Japan Governor Kazuo Ueda said on Friday the central bank will focus on anchoring underlying inflation around its 2% target and won't tolerate any overshoot. He stressed anew the bank's resolve to continue raising interest rates.
According to Ueda: "we cannot tolerate inflation from accelerating further", he told a news conference in Bangkok. He added that domestic data and talks with global policymakers at this week's IMF meetings suggested economic and price developments were moving roughly in line with the BOJ's projections.
Global inflation pressure meets a key BOJ meeting
The remarks came ahead of the BOJ's policy meeting later this month, where the board will produce fresh quarterly growth and inflation forecasts. Those forecasts will be scrutinised for clues on the pace and timing of future rate hikes.
The BOJ may face renewed pressure to increase the pace of hikes amid global inflationary pressures from the Iran war and an AI-driven demand shock, which dominated discussions at the IMF meetings. Ueda said more policymakers saw global AI demand as somewhat stronger than the BOJ had expected.
Many at the BOJ prefer to wait in October
Having raised rates in September, many in the BOJ prefer to stand pat at the October 29-30 meeting, sources told Reuters. They want more data on how the hikes so far have affected economic and financial conditions.
Even so, the BOJ is likely to drop hawkish signals that leave scope for a December rate hike, analysts say. They note that AI adds to inflationary pressures from high energy costs and rising import prices due to a weak yen.
The BOJ hiked in June and September, but its policy rate of 1.25% still means negative real borrowing costs. US Treasury Under Secretary Erin Browne kept pressure on the BOJ to continue tightening to prevent disorderly yen falls.
The Federal Reserve's decision at its October 27-28 meeting could also affect the BOJ's debate through any impact on the yen, because the still-wide US-Japan rate divergence has weakened the currency, analysts say.
Source: Reuters via Investing.com
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