Governor Kazuo Ueda said on Tuesday it had become more important to anchor underlying inflation around 2 percent, after the Bank of Japan raised rates in September.
Bank of Japan Governor Kazuo Ueda said on Tuesday that it had become more important to anchor underlying inflation around the 2 percent target, signalling that the bank was prepared to keep raising rates to limit the risk of an overshoot.
Ueda said the economy was recovering moderately and that the tankan survey pointed to solid business sentiment. Rising raw-material costs were lifting wholesale prices, with pressure spreading to consumer inflation, and long-term inflation expectations were still rising, he said. He cited the US-Israeli war with Iran, strong AI-related demand and a weak yen as risks that could push underlying inflation above target.
Financial conditions remained accommodative even after the September rate increase, Ueda said, and the bank would continue to raise borrowing costs to adjust the level of support. In the statement that accompanied the September hike, the bank had said only that anchoring inflation around the target was important. Reuters said that hike took the key rate to a 31-year high.
Separately, three sources familiar with the bank's thinking told Reuters it may signal this month that underlying inflation has roughly reached 2 percent, in the quarterly report due after the October 29-30 meeting. They said many officials were cautious about another hike this month and wanted more data on how past increases had affected domestic conditions. The July report had expected underlying inflation to reach levels consistent with 2 percent sometime between October and March 2028.
No rate decision was taken on Tuesday. The next policy meeting ends on October 30.
People Sentiments Neutral
- Kazuo Ueda said it had become more important than before to ensure underlying inflation is anchored around 2 percent.