BOJ chief tells Japan’s new premier the central bank will move cautiously on rate hike timing

Bank of Japan Governor Kazuo Ueda said he told new Prime Minister Shigeru Ishiba in a meeting on Wednesday (Oct 2) that the central bank was supporting Japan’s economy and will move cautiously in deciding whether to raise interest rates further.
The meeting, Ueda’s first with the new prime minister since he was officially appointed by parliament on Tuesday, came after Ishiba urged the BOJ to maintain loose monetary policy, as the government strives to end economic stagnation.
“I told the prime minister that we are supporting the economy with loose monetary conditions,” Ueda told reporters after the meeting at the prime minister’s official residence.
Ueda said he explained that the BOJ will raise interest rates if economic and price developments move in line with its forecast.
“But I said we will adjust the degree of monetary support cautiously, as we can afford to spend time scrutinising (economic) developments,” Ueda added.
In August, Ishiba told Reuters the BOJ was on the “right policy track” in ending negative rates and endorsed further normalisation of monetary policy, saying it could boost industrial competitiveness.
His focus on the need to get Japan permanently out of deflation underscores the new administration’s preference for the BOJ to go slow in hiking rates, analysts say.
Ishiba’s newly-appointed economy minister, Ryosei Akazawa, also voiced hope on Wednesday that the BOJ would be cautious about raising interest rates further.
While the BOJ’s current policy rate, at 0.25 per cent, was “abnormal in global standards,” Japan’s priority was to “pull out of deflation,” Akazawa said.
The BOJ ended negative rates in March and raised short-term borrowing costs to 0.25 per cent in July on the view Japan was making progress towards durably achieving 2 per cent inflation.
Ueda’s hawkish comments at the time, coupled with weak US jobs data, triggered a spike in the yen and stock market rout in early August. Since then, BOJ policymakers have stressed the need to take into account the economic fallout from market volatility.
The BOJ next reviews rates on Oct. 30-31, when the board also releases fresh quarterly growth and price forecasts. It holds another meeting in December.
A majority of economists polled by Reuters on Sept. 4-12 expected the BOJ to raise rates again by year-end.