BOJ Chief Signals Rate Hikes If Inflation Persists

Bank of Japan Governor Kazuo Ueda has indicated that the central bank will likely raise interest rates if underlying inflation continues to rise. Speaking at a think tank event in Washington, Ueda acknowledged the challenges of determining the appropriate level of interest rates as Japan has not experienced a sustained period of rising rates in over three decades.

For the time being, the BOJ intends to maintain accommodative financial conditions as inflation remains below the 2% target. However, Ueda emphasized that the bank will closely monitor wage growth and service price inflation.

"If underlying inflation continues to go up, we will be very likely raising interest rates," he said.

"We will proceed cautiously, initially assessing the impact of our recent policy changes on the economy and inflation, then considering further adjustment as deemed appropriate, perhaps extracting insights on the neutral rate along the way"

The BOJ is scheduled to hold a policy meeting next week, and markets are not expecting any changes. However, the central bank is likely to revise its inflation forecasts for the current and following fiscal years. Ueda has also indicated that the BOJ will consider the impact of a weaker yen on inflation.