Bank of Japan Governor Kazuo Ueda reinforced the central bank’s tightening bias on Wednesday, signaling that further rate hikes remain likely as inflation risks continue to build. In remarks delivered by Deputy Governor Ryozo Himino while Ueda recovers from a recent hospitalization, the governor said that “with underlying inflation moving toward 2% and financial conditions remaining accommodative, we expect to continue increasing the interest rate and adjusting the degree of monetary accommodation in response to economic activity, prices and financial conditions.”
The comments closely echoed the message delivered at last week’s policy meeting, where the BoJ raised its benchmark interest rate to 1.00%, the highest level since 1995. Ueda also reiterated concerns that inflation could overshoot the Bank’s target, particularly after the recent surge in energy prices linked to the conflict in the Middle East. While oil prices have retreated following progress toward peace, policymakers continue to see risks that higher costs could spread more broadly through the economy.
Ueda emphasized that the timing and pace of future adjustments would depend on incoming data and external developments, including the aftermath of the Iran conflict. Nevertheless, the overall message remained firmly hawkish. His remarks come just hours after the BoJ’s Summary of Opinions revealed broad support for additional tightening, with several policymakers discussing the need to move rates closer to a neutral level over time. Together, the comments reinforce market expectations that last week’s hike was not the end of the normalization cycle.
