Bank of Japan Governor Kazuo Ueda stated that the central bank will carefully examine various data before next month's interest rate review and will 'seriously' consider the impact of yen exchange rate fluctuations on the economic and price outlook.
As the market closely watches Ueda's speech for clues on whether the Bank of Japan might raise interest rates next month, he stated that the central bank will make decisions 'at each meeting' based on the information that will soon be available.
Kazuo Ueda stated at the Tokyo European Financial Forum, 'There is still more than a month until the next Bank of Japan meeting in December. During this time, a lot of data and information will be released.'
These remarks followed statements on Monday about Japan's progress in achieving wage-driven inflation, leading to a rise in the yen and Japanese bond yields, which the market interpreted as a signal that an interest rate hike may be possible next month.
The yen has recently fallen again, raising import costs and inflation, which has led some market participants to bet that the Bank of Japan may raise interest rates as early as its policy meeting on December 18 to 19.
When asked about the impact of exchange rate fluctuations, Ueda stated, 'We do seriously consider exchange rate changes when forming our economic and inflation outlook, including the question of what the reasons for the current exchange rate changes are.'
Following the above remarks, the USD/JPY exchange rate fell by 0.47%, hovering around 154.5, while the 5-year Japanese government bond yield rose by 4 basis points to 0.75%, the highest level since June 2009.
In a prepared speech at the forum, Ueda did not comment on monetary policy, focusing instead on how to use technological innovation to reduce risks in the financial system.
The Bank of Japan ended its negative interest rate policy in March and raised its short-term policy interest rate to 0.25% in July, citing Japan's imminent achievement of its 2% inflation target.
Kazuo Ueda has indicated that if the economy and prices develop as predicted, the central bank is prepared to raise interest rates again.
The weakness of the yen was one of the factors that led the Bank of Japan to decide to raise interest rates in July. Since then, analysts believe that the movement of the yen is a key trigger for further rate hikes.
The recent rise of the dollar is partly due to market expectations that the inflation policy proposed by U.S. President Donald Trump could prevent the Federal Reserve from excessively cutting interest rates, putting downward pressure on the yen. Ueda stated that it is difficult to predict how Trump's policies will affect the Japanese economy. He said, 'Once the new government announces new policies, we will incorporate them into our economic outlook.'
A survey conducted from October 3 to 11 showed that most economists expect the Bank of Japan will not raise interest rates this year, although nearly 90% of economists expect rates to rise by March next year.
Article forwarded from: Jin Shi Data
