BoJ’s Uchida: Japan's economy recovering moderately, albeit with some weak signs

Lallalit Srijandorn FXStreet

Bank of Japan (BoJ) Deputy Governor Shinichi Uchida said on Wednesday that Japan's economy is recovering moderately, albeit with some weak signs.

Key quotes

Tankan showed business sentiment positive overall as uncertainty over us tariff outlook recedes.

CAPEX rising moderately as a trend.

Consumption moving on firm note.

BoJ expects to continue raising interest rates if economy, prices move in line with forecast.

Expects moderate recovery after slowdown as overseas economy returns to growth.

Will judge without any preset idea whether our economic, price forecasts materialise.

Need to be mindful of impact of global trade policies on economy, financial, forex markets.

Uncertainties over trade policies remain high.

Underlying inflation likely to stagnate for some period before re-accelerating gradually as inflation expectations heighten.

Market reaction

At the press time, the USD/JPY pair is up 0.07% on the day to trade at 147.30.

Bank of Japan FAQs

What is the Bank of Japan?

The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.

What has been the Bank of Japan’s policy?

The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.

How do Bank of Japan’s decisions influence the Japanese Yen?

The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.

Why did the Bank of Japan decide to start unwinding its ultra-loose policy?

A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.

Author

Lallalit Srijandorn

FXStreet

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

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