Bank of Japan Governor Ueda hints at possible additional interest rate hikes next year

Source: BlockMedia Original Title: Japan’s Bank of Japan Governor Ueda Signals Possible Rate Hike Original Link: BoJ Governor Kazuo Ueda mentioned confidence in achieving inflation targets and hinted at the possibility of additional rate hikes next year. Market observers are increasingly expecting the Bank of Japan to continue its tightening stance.

In a speech at a conference hosted by the Japan Business Federation, Ueda stated, “The goal of 2% inflation with wage increases is steadily approaching,” and “As the labor market tightens, corporate wage and price-setting behaviors have significantly changed over the past few years.”

This statement comes after the BoJ raised its policy interest rate last week to the highest level since 1995. Ueda reaffirmed his willingness to consider further hikes if the economic outlook materializes, adopting a more hawkish tone than during the previous press conference. He also emphasized that real interest rates remain quite low.

Market consensus suggests a high likelihood that the BoJ will raise rates at six-month intervals in the future. Many BoJ analysts are placing weight on this scenario.

Ueda said, “It is very likely that the mechanism of gradual wage and price increases will continue beyond next year,” and “The probability of the BoJ’s baseline scenario materializing is also increasing.”

This time, he clearly mentioned the possibility of additional rate hikes and avoided comments that could weaken the yen. Some analysts suggest that if yen depreciation stimulates import prices, the BoJ might implement further hikes sooner than expected.

Japan’s core inflation indicator has remained above 2% for over three and a half years. Ueda noted that cases of companies passing cost increases to consumers are spreading, and the Japanese economy’s resilience is gradually strengthening. He said, “The likelihood of returning to a so-called ‘zero nominal’ state where wages and prices hardly move has significantly decreased.”