Governor of the Bank of Japan Kazuo Ueda stated on Friday that if underlying inflation keeps rising, the central bank "very likely" to hike interest rates and eventually start to cut back on its massive bond purchases.
According to Ueda, long-term inflation expectations are still close to 1.5% and underlying inflation is "somewhat below" the central bank's 2% target, therefore the bank must continue its loose monetary policy for the time being.
But since concluding its multiple unconventional monetary easing programmes in March, the BOJ has tightened its policy and may alter its goal for short-term interest rates in response to future developments, he continued.
"We will proceed cautiously, initially assessing the impact of our recent policy changes on the economy and inflation, then considering further adjustment as deemed appropriate, perhaps extracting insights on the neutral rate along the way," Ueda told a seminar hosted by the Peterson Institute for International Economics.
According to Ueda, the BOJ will start reducing the amount of Japanese government bonds (JGBs) it buys, albeit the precise date and size of the reduction have not yet been decided.
"We will like to find a way and timing to reduce the amount of JGB purchases, regardless of what the data will say in the near future," he stated, stressing that the central bank will take some time to make a decision.
The comments support views in the market that at some point this year, the BOJ will increase its short-term interest rate goal from the current range of 0-0.1%.
Friday's closing price of US stocks was uneven, with the tech-heavy Nasdaq experiencing its largest weekly loss since October 2022.
The BOJ abandoned eight years of zero interest rates and other aspects of its unconventional policy in March, signalling a historic change in focus away from using decades of huge monetary stimulus to stifle deflation and revive recovery.
When the Bank of Japan delivers its latest quarterly growth and inflation predictions at its policy meeting next week, the markets will be watching for cues about when to expect the next rate hike.
Prioritising data on salaries and the potential impact of growing wages on service prices, the BOJ will closely examine inflation expectations before determining when to raise interest rates, according to Ueda.
"If underlying inflation continues to go up, we will very likely be raising interest rates," he stated.
(Source:www.japantimesco.jp)
According to Ueda, long-term inflation expectations are still close to 1.5% and underlying inflation is "somewhat below" the central bank's 2% target, therefore the bank must continue its loose monetary policy for the time being.
But since concluding its multiple unconventional monetary easing programmes in March, the BOJ has tightened its policy and may alter its goal for short-term interest rates in response to future developments, he continued.
"We will proceed cautiously, initially assessing the impact of our recent policy changes on the economy and inflation, then considering further adjustment as deemed appropriate, perhaps extracting insights on the neutral rate along the way," Ueda told a seminar hosted by the Peterson Institute for International Economics.
According to Ueda, the BOJ will start reducing the amount of Japanese government bonds (JGBs) it buys, albeit the precise date and size of the reduction have not yet been decided.
"We will like to find a way and timing to reduce the amount of JGB purchases, regardless of what the data will say in the near future," he stated, stressing that the central bank will take some time to make a decision.
The comments support views in the market that at some point this year, the BOJ will increase its short-term interest rate goal from the current range of 0-0.1%.
Friday's closing price of US stocks was uneven, with the tech-heavy Nasdaq experiencing its largest weekly loss since October 2022.
The BOJ abandoned eight years of zero interest rates and other aspects of its unconventional policy in March, signalling a historic change in focus away from using decades of huge monetary stimulus to stifle deflation and revive recovery.
When the Bank of Japan delivers its latest quarterly growth and inflation predictions at its policy meeting next week, the markets will be watching for cues about when to expect the next rate hike.
Prioritising data on salaries and the potential impact of growing wages on service prices, the BOJ will closely examine inflation expectations before determining when to raise interest rates, according to Ueda.
"If underlying inflation continues to go up, we will very likely be raising interest rates," he stated.
(Source:www.japantimesco.jp)
