BOJ’s Ueda to decide on interest rate hike with upside price risks in mind
He said economic data have been in line with the central bank’s outlook
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BANK of Japan Governor Kazuo Ueda said the bank’s board would decide on policy with upside price risks in mind, a comment that may further fuel market speculation over a potential interest rate hike at a meeting later this month.
The central bank will have a thorough debate on policy when it gathers on Sep 17-18, as it does at every meeting, Ueda told reporters after a meeting of Group of 20 finance ministers and central bankers in Asheville, North Carolina. Ueda appeared at a joint briefing with Finance Minister Satsuki Katayama.
Ueda’s comments are likely to reinforce expectations that the BOJ will raise its benchmark rate on Sep 18. The governor has emphasised careful communication around policy decisions since drawing criticism over a July 2024 rate hike that caught some traders off guard and contributed to market volatility.
With overnight index swaps implying a roughly 99 per cent probability of a September hike, the governor pointedly avoided pushing back against those expectations.
Ueda declined to comment on the market’s positioning, but he said economic data have been in line with the central bank’s outlook, suggesting the BOJ is on track for further rate increases. He also said the price trend is very close to the BOJ’s 2 per cent target.
Ueda spoke after US Treasury Secretary Scott Bessent stepped up his calls for appropriate BOJ policy action this week, adding to market expectations for an imminent move.
The yen was trading around 160.20 per dollar on Wednesday morning in Tokyo, having lost much of the gains it made after a historic coordinated intervention by Japan and the US to prop it up on Jul 31.
Ueda and Katayama both sought to calm the market after Japan’s benchmark 10-year bond yield hit 3 per cent, the highest level in three decades, on Tuesday.
Katayama said no one at the G-20 meeting expressed concerns over Japan’s finances, while Ueda characterised the rise in bond yields as tracking global trends.
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The rise in benchmark yields also came as it became clear that Japan’s ministries would request a record amount of spending for next fiscal year, putting Prime Minister Sanae Takaichi’s fiscal ambitions in sharper focus.
Much of the increase in requested spending reflects an accounting change, with the premier seeking to end the long-standing practice of compiling supplementary budgets in addition to the annual one. REUTERS
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