Bank of Japan Governor Ueda said more rate hikes are likely after raising the benchmark rate to 1.00% last week. The hawkish message reinforces expectations that the normalization cycle has further to go.
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Bank of Japan Governor Kazuo Ueda reinforced the central bank's tightening bias on Wednesday. In remarks delivered by Deputy Governor Ryozo Himino while Ueda recovers from a recent hospitalization, the governor said further rate hikes remain likely. “With underlying inflation moving toward 2% and financial conditions remaining accommodative, we expect to continue increasing the interest rate and adjusting the degree of monetary accommodation in response to economic activity, prices and financial conditions,” Himino read on Ueda’s behalf.
The comments closely echoed the message from last week’s policy meeting, where the BoJ raised its benchmark interest rate to 1.00%, the highest level since 1995. Ueda reiterated concerns that inflation could overshoot the Bank’s target. He cited the recent surge in energy prices linked to the conflict in the Middle East. Oil prices have retreated following progress toward peace. Policymakers continue to see risks that higher costs could spread more broadly through the economy.
Ueda emphasized that the timing and pace of future adjustments would depend on incoming data and external developments, including the aftermath of the Iran conflict. His remarks come just hours after the BoJ’s Summary of Opinions revealed broad support for additional tightening. Several policymakers discussed the need to move rates closer to a neutral level over time. The Summary of Opinions and Ueda’s remarks together pointed to further normalization of policy.
The hawkish signal from Tokyo has direct implications for USD/JPY and yen crosses. A more aggressive BoJ narrows the rate differential between the yen and the dollar, a dynamic that has driven much of the yen’s weakness over the past two years. The forex market analysis page tracks how shifting rate expectations affect major pairs. A stronger yen also reshuffles carry-trade flows, influencing EUR/USD and GBP/USD profiles. Traders in yen crosses, such as EUR/JPY, are watching for a break below key support levels as the BoJ's stance shifts.
Ueda said the pace of future adjustments would depend on incoming data and external developments, including the aftermath of the Iran conflict.
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