Bank of Japan Governor Kazuo Ueda emphasized that monetary policy remains supportive, noting that real interest rates in Japan are still “clearly negative” and keeping financial conditions accommodative.
At the same time, Ueda flagged a potential headwind from fiscal policy. He warned that increased government spending could drive up market interest rates, raising the risk of “crowding out” private sector investment. This reflects concern that fiscal expansion, while supportive in the short term, could complicate the broader policy mix.
Despite these risks, Ueda struck a constructive tone on the outlook for investment. He highlighted that accommodative conditions are already feeding through to a “moderate uptrend” in capital expenditure, suggesting that negative real rates remain an effective transmission channel.
