The Bank of Japan will continue to raise its policy rate if the economy and prices move in line with expectations, Governor Kazuo Ueda said Monday, noting that such an adjustment will help achieve long-term economic growth and its inflation target.
His remarks came amid speculation that the central bank may hike as early as December, although he only said the BOJ will make policy decisions at each meeting based on its latest assessment and outlook for economic and price activities.
“I think that gradually adjusting the degree of accommodation in line with the improvement in economic activity and prices will support long-term economic growth and contribute to achieving the price stability target in a sustainable and stable manner,” he said in a speech in the central Japan city of Nagoya.
On the timing of further increasing the policy rate from the current level of around 0.25 percent, Ueda said the bank also needs to carefully monitor the U.S. and other overseas economies.
The governor pointed out that it has become more likely that the U.S. economy will achieve a soft landing given recent solid economic data, but also noted the possibility of “a resurgence of inflation” as a result of future economic developments and policy conduct.
The U.S. dollar has been strengthening against the yen recently amid speculation that policies proposed by U.S. President-elect Donald Trump would increase inflation and keep interest rates elevated.
Ueda said that underlying inflation, excluding short-term fluctuations such as a rise in import prices, still remains below the bank’s goal of 2 percent, but it is expected to continue to rise gradually, helped by a rise in wages.
“Inflationary pressure stemming from wage increases is projected to strengthen as an improvement in economic activity and solid growth in wages continue,” he said in a meeting with local business leaders.
The BOJ ended its negative rate policy in March with the first rate hike in 17 years, followed by another increase in July. It kept its policy rate unchanged at the September and October meetings.
The BOJ expects prices to rise 2.5 percent for the current fiscal year ending March and 1.9 percent for fiscal 2025 and 2026, below the bank’s price stability goal of 2 percent, according to its latest outlook on economy and prices released in October.
BY: The Times Union – KYODO
