Ueda signals more BOJ hikes ahead but flags cumulative rate risks
Ueda’s comments strike a carefully balanced tone that leaves the door open for further tightening without committing to a specific timeline, keeping September pricing intact without validating it outright. His framing of long-term yield rises as largely a global phenomenon rather than a domestic policy signal will likely ease some concern that the BOJ sees its own hikes as destabilising the JGB market, even as the benchmark yield sits near 3 percent. At the same time, his acknowledgment that upside price risks remain part of the policy calculus, alongside underlying inflation sitting close to the 2 percent target, keeps a hawkish undertone in play. Katayama’s comments on monitoring debt markets with heightened urgency, paired with his refusal to comment on specific JGB levels, suggest the finance ministry is watching yield moves closely without signalling imminent intervention.
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Earlier:
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Ueda keeps the door open to more hikes while urging caution over how much tightening the economy can absorb.
Summary:
- BOJ Governor Ueda says the bank wants to continue raising rates given monetary conditions remain accommodative
- Ueda says the BOJ has raised its policy rate five times so far and needs to carefully scrutinise the cumulative impact on the economy
- Ueda says the bank will also factor in upside price risks when deliberating policy
- Ueda says whether the likelihood of its economic scenario materialising, and whether inflation risks have heightened, will be discussed at the next board meeting
- Ueda says underlying inflation is quite close to 2 percent and the BOJ must ensure it stabilises around that level
- Ueda says recent rises in long-term rates are driven largely by global yield increases, and the economic impact will depend on what is driving the moves
- Ueda says the BOJ would not react more strongly than before to FX moves alone in setting policy
- Japan Finance Minister Katayama declines to comment on the benchmark JGB yield hitting 3 percent, saying rates are determined by markets, but says he is monitoring debt market conditions with an extremely high sense of urgency
- Katayama says Japan will conduct debt management policy appropriately while communicating closely with markets, and believes total budget requests have been at a reasonable level
- Katayama says he held 30 minutes of talks with Fed Chair Warsh, and separately relayed that Bessent has said it is right to aim for higher economic growth potential and productivity through domestic investment
Bank of Japan Governor Kazuo Ueda signalled the central bank intends to keep raising interest rates, telling reporters that monetary conditions remain accommodative and that the BOJ would like to continue tightening policy. He noted the bank has already raised its policy rate five times, and said officials need to carefully scrutinise how the cumulative impact of those hikes could affect the broader economy. Even so, Ueda said the bank will also weigh upside price risks in its deliberations, keeping a hawkish option firmly on the table.
Ueda said the central bank’s next board meeting would specifically address whether the likelihood of its current economic scenario materialising has increased, and whether inflation risks themselves have heightened, framing the coming meeting as a genuine decision point rather than a formality. He added that underlying inflation is now quite close to the BOJ’s 2 percent target, and that the bank’s task is to ensure it stabilises around that level rather than overshooting or slipping back below it.
On the recent rise in long-term Japanese government bond yields, which has pushed the benchmark toward the 3 percent level, Ueda said the moves are being driven largely by global increases in yields rather than domestic factors specific to Japan. He said the ultimate impact of those yield moves on the economy would depend on what is actually driving them, a distinction that suggests the BOJ is not treating the rise as an immediate policy problem in itself. Ueda also addressed the exchange rate directly, saying the bank would not focus on FX in isolation or react more strongly than it has previously to currency moves when setting policy, pushing back gently against the idea that a weaker yen alone would force the BOJ’s hand.
Japan’s Finance Minister Katayama, speaking alongside Ueda’s comments, declined to comment on the benchmark JGB yield’s move toward 3 percent specifically, saying interest rates are ultimately determined by markets based on a range of factors. He said Japan is monitoring debt market conditions with an extremely high sense of urgency and will manage its debt policy appropriately while maintaining close communication with markets, adding that he believes the government’s total budget requests have been set at a reasonable level. Katayama also said he held a 30 minute conversation with Federal Reserve Chair Warsh, and separately noted that US Treasury Secretary Bessent has said it is right for countries to aim for higher economic growth potential and productivity through domestic investment, a theme that appeared to run through several of the sidelines conversations at the G20 gathering.
This article was written by Eamonn Sheridan at investinglive.com.