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Bank of Japan Governor Kazuo Ueda on Wednesday did not rule out further policy hikes in 2024, following the Board’s decision to raise its short-term interest-rate target to 0.25%, noting economic activity will dictate future action.
Speaking to reporters, Ueda failed to offer clues over specific timing, adding gradual rises based on economic activity and prices would will help decrease the risk of rushed future hikes. “We don’t draw the path of raising the interest rate in advance,” he commented.
Ueda noted Wednesday’s decision was driven by economic activity and prices, which had moved in line with the Bank’s expectations. “In addition, we coped with the upside risks to prices caused by the weak yen," he added. However, he emphasised the currency's performance was not the primary reason for the board's decision.
The board’s move, which lifted the BOJ’s benchmark unsecured overnight call loan rate 15 basis points and to its highest level since 2008, was largely unanticipated. (See MNI BOJ WATCH: Cut To JGB Buys; Close Rates Decision)
The hike was the BOJ’s first since March, when it ended its negative rates policy.
ECONOMIC DOWNSIDES
Ueda said the BOJ would lower interest rates if the economy slowed. “I don’t know which level the policy rate would be at that time,” he said, when pressed on the economy’s downside risks and the low level of interest rates. The Bank would likely adopt unconventional easy policy, he added, but declined to elaborate further.
The BOJ also decided to lower its purchase of JGBs by JPY400 billion a quarter, with the scale of JGB buying falling to JPY2.9 trillion a month by Q1 2026 from its current level of about JPY6 trillion.
The BOJ board also expects the core consumer price index and core-core CPI in fiscal 2026 to rise 1.9% and 2.1%, unchanged from the previous forecast made in April, according to the Bank's latest Outlook Report. (See chart)
However, the BOJ noted significant upside risk to prices exists in FY2024 and 2025. The board’s forecast for core CPI in FY2025 was revised up to 2.1% from April’s 1.9% and the price view this fiscal year was revised down to 2.4% from 2.8% made in April.
The board next meets Sept. 19-20.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.