Ueda States Current Policy Rate Far Below Likely Neutral Rate

BoJ Governor Ueda hasn't sounded as dovish as Deputy Governor Uchida (relative to remarks from early August), as Ueda's appearance before both houses of parliament continues.

• The Governor stated early in his appearance that market shifts need to be watched closely. Such developments can also impact the economic outlook. He also noted that the central bank needs to communicate its thinking/outlook carefully.
• These points were a likely nod from the Governor to the early August market rout, of which the late July BoJ rate rise, was partially attributed to (weaker US NFP the other big driver).
• Still, Ueda noted that there had been no change to the central bank's outlook that further policy adjustments can be made if certainty (likely around sustainably achieving its inflation target) rises.
• Ueda noted that current rates are still quite low and if the economy remains in good shape, the central bank can raise rates up to neutral levels (RTRS).
• Ueda didn't state what the neutral level was, but noted there is high uncertainty (one board member indicated it was around 1% at the last board meeting). He added current rates are still far below the likely neutral rate (RTRS).
• The weaker yen also played into upside inflation risks (somewhat) at the July policy meeting.
• On a slightly more dovish note, Ueda stated that by keeping the current policy stance it will move closer to its inflation target.
• Overall though Ueda's remarks so far today clearly point to room for further policy adjustments.