Bank of Japan Governor: "If Indicators Support, Rate Hike Possible in July"

Kazuo Ueda, Governor of the Bank of Japan (BOJ), stated that a rate hike in July is possible if economic indicators support it.

[Image source=Reuters Yonhap News]

According to Bloomberg and other sources, Governor Ueda appeared before the House of Councillors’ Committee on Financial Affairs on the morning of the 18th and said, "Under the 2% price stability target, we will appropriately conduct monetary policy based on the economic, price, and financial conditions."

He mentioned that the economic indicators obtained since April generally align with the BOJ’s forecasts and responded that an additional rate hike at the next meeting in July is "naturally possible." However, he also emphasized that the incoming data must support such a decision.

The news agency noted that it is unclear whether Governor Ueda’s remarks leaving room for a July hike were intended to hint at a real possibility of a rate increase or were statements mindful of the market to ease pressure on the yen. On the same day, Governor Ueda also expressed a cautious stance, saying that "a little more time" is needed to judge whether the 2% price stability target is on a sustainable path.

Governor Ueda forecasted that inflation will gradually rise as Japan’s wage-price cycle strengthens. He also assessed that the Japanese economy is recovering moderately. Additionally, he added that he will continue to monitor the economic situation and the impact on inflation related to the recent weak yen.

In a Reuters survey released the previous day, 41% of economists?about four out of ten?expected the BOJ’s next rate hike to occur in October. Thirty-one percent of respondents chose July. The BOJ is scheduled to hold its Monetary Policy Meeting on July 30?31.

At the June Monetary Policy Meeting held last week, the BOJ decided to keep the current benchmark interest rate at 0 to 0.1% unchanged, while planning to reduce the amount of long-term government bond purchases, which had been around 6 trillion yen per month, starting next month. The scale and pace of the reduction will be finalized at the July meeting after confirming market participants’ opinions. Accordingly, some in the market evaluated that the BOJ’s bond purchase reduction measures have lowered the possibility of an additional rate hike in July.

Previously, the BOJ ended its negative interest rate policy for the first time in 17 years by raising the benchmark interest rate from -0.1% in March.

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