BoJ’s Ueda says will raise rates if prices, economy move as forecast
Bank of Japan (BoJ) Governor Kazuo Ueda said on Monday that the Japanese central bank remains on track to raise interest rates further if prices and the economy continue to unfold as expected.
Key quotes
Overseas economies have shown some weakness but are still gradually increasing as a whole.
Global growth is likely to slow temporarily under the weight of trade measures.
The likelihood of the BoJ’s baseline scenario for growth and inflation being realised is gradually increasing.
Private consumption resilient but households feeling pain from higher prices, so must watch moves closely.
US tariffs are weighing on manufacturers' profits but don't see impact on capex broadening significantly.
Whether mechanism in which wages and prices rise in tandem will be sustained is key in conducting monetary policy.
Market reaction
As of writing, the USD/JPY pair is down 0.33% on the day at 155.65.
Bank of Japan FAQs
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%.
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.
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.
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.
