Japan's Ueda: "Cannot Guarantee 2% Inflation... Policy End Unpredictable"

"Uncertainty in Achieving Target Inflation
Too Early to Assess Policy Adjustment Effects
Policy Revision Only When 2% Range Is Assured"

Kazuo Ueda, Governor of the Bank of Japan (BOJ), firmly stated that the Japanese benchmark interest rate will be kept unchanged and that an early revision of the accommodative monetary policy is impossible. Although Japan has recently experienced a price increase in the 3% range, he described this as a temporary factor and said, "We cannot guarantee that inflation will remain in the 2% range going forward."

Kazuo Ueda, Governor of the Bank of Japan
[Photo by Yonhap News]

On the 16th, Governor Ueda said at a press conference after the September monetary policy meeting, "It is absolutely impossible to take preemptive measures regarding monetary policy revisions."

He assessed that it is uncertain whether Japan's inflation will continue to rise in the 2% range. Currently, Japan's Consumer Price Index (CPI, August) rose 3.1% year-on-year, exceeding 3% for 12 consecutive months. However, Governor Ueda judged that uncertainties surrounding the Japanese economy are high, and it may fail to maintain inflation in the 2% range. He saw the possibility of inflation slowing down in the future due to the impact of the global economic recession and international raw material prices.

When asked whether there is a possibility of changing policy in the future, he avoided a specific answer, saying, "If the inflation target is expected to be achieved, we can consider adjustments to abolish the negative interest rate and yield curve control (YCC) policies." However, he added, "If inflation reaches the target, there are various options regarding which policies to change and in what order."

He also cited the fact that the effects of partially revising monetary policy have not yet appeared in the market as a reason for maintaining the current policy. He said, "It is premature to judge whether the effects of (monetary policy revisions) have appeared." At the July monetary policy meeting, the BOJ took measures to effectively raise the upper limit of the 10-year government bond yield, a benchmark for long-term interest rates, from the existing 0.5% to nearly 1%. As a result, the current 10-year Japanese government bond yield surged to 0.745% the previous day, the highest level in 10 years since September 2013.

The BOJ's announcement to maintain accommodative monetary policy led to a decline in the value of the yen. The dollar-yen exchange rate, which had stayed in the 147 yen range until the morning, broke through 148 yen in the afternoon. At 4:30 p.m. in the Tokyo foreign exchange market, the dollar-yen exchange rate was trading at 148.27 yen.

This content was produced with the assistance of AI translation services.