TOKYO :The Bank of Japan will continue raising interest rates if economic and price developments move in line with its forecasts, BOJ Deputy Governor Shinichi Uchida said, reaffirming the bank’s stance of scrutinising data in making policy decisions.
The remarks largely followed his comments this month reiterating that the business mood was improving in Japan, even as U.S. tariffs weigh on exports, a sign that conditions for another interest rate hike were falling into place.
“If our economic and price forecasts materialise, we will continue to raise interest rates in accordance with improvements in economic and price conditions,” Uchida told a meeting of Japanese credit unions in a speech on Friday.
“We will judge without any pre-conception whether our forecasts will materialise, while scrutinising domestic and overseas economic and price developments as well as financial market moves.”
The comments echoed those of Governor Kazuo Ueda on Thursday that the central bank would scrutinise various data in deciding whether to raise interest rates in October.
Uchida also pointed to high uncertainty surrounding overseas economic and price developments, due to trade policies.
“It’s necessary to closely monitor how these developments may affect financial and foreign exchange markets, as well as Japan’s economy and prices,” he said.
The BOJ ended a massive, decade-long stimulus programme last year and raised rates to 0.5 per cent in January, on the view that Japan was on the cusp of durably hitting its inflation target of 2 per cent.
While inflation has exceeded 2 per cent for more than three years, Ueda has stressed the need to tread cautiously in raising borrowing costs to ensure price rises are driven by wage gains and robust domestic demand.
Highlighting the BOJ’s growing attention to inflationary pressure, two of its nine board members proposed unsuccessfully to raise rates in September, which heightened market bets for a rate hike in October.
But expectations of a rate hike receded after fiscal dove Sanae Takaichi’s surprise victory in the ruling Liberal Democratic Party leadership race on October 4.
Most analysts expect the BOJ to raise rates to 0.75 per cent by January next year, though they are split on the exact timing.
