BoJ’s Ueda: Possible rate increase in July depending on data

The Bank of Japan (BoJ) Governor Kazuo Ueda said on Tuesday that there is a chance that the Japanese central bank could raise interest rates at the July meeting, depending on economic, price and financial data and information available at the time.  

Key quotes

Sees moderate recovery in Japan's economy.

Expects a gradual rise in price trend. 

Monitoring the FX impact on the economy and inflation.

Data out since April is roughly in line with BoJ estimates.

To conduct appropriate policy aligned with economic conditions

To adjust the degree of easing as needed using rates.

Sees economic data in line with expectations.

Sees uncertainty in expected price increase.

JGB yields are determined by the market.

Aims to boost market influence by reducing bond purchases.

Difficult to determine scale of reduction in bond purchases now. 

Seeks predictability for bond purchases.

Sees possible rate increase in July depending on data.

Rate hikes and bond purchases are distinct matters. 

As we taper bond buying, we will of course be aiming to shrink size of our balance sheet in ratio to GDP terms.

Basic purpose of our bond tapering would be to allow yields to move more freely driven by market forces, and revive market functioning.

Japan's economy will likely see more clear signs of positive wage-inflation cycle as nominal wages rise.

Must be vigilant to impact of weak Yen, import price moves on economy.

Consumption likely to increase moderately as nominal wage gains accelerate.

For now, don't expect Japan to experience stagflation.

Market reaction

At the time of writing, USD/JPY is trading 0.06% lower on the day to trade at 157.63.