BOJ Governor Ueda: Rate Hike Still on Table
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Bank of Japan (BOJ) Governor Kazuo Ueda has reiterated the central bank's willingness to raise interest rates if the economy continues to improve, Bloomberg reports. This comes as market watchers closely scrutinize the BOJ's next steps, seeking clues on the timing of its next rate hike.
In his first public speech of 2025, Ueda stated, "Our stance is that we will raise the policy interest rate to adjust the degree of monetary easing if economic and price conditions keep improving." The governor made these remarks at a New Year conference held by the Japanese Bankers Association in Tokyo.
Ueda's comments aim to clarify the BOJ's position following mixed signals from the December policy meeting. While the central bank maintained the benchmark rate at 0.25% last month, dovish comments from Ueda during his post-meeting press conference fueled speculation that a January rate hike was unlikely. This led to a weakening of the yen, as markets had previously anticipated a rate hike by January.
However, the December meeting's summary of opinions revealed that some board members favor raising borrowing costs sooner rather than later. Ueda's latest remarks underscore that a rate hike remains a possibility this month, although the central bank could still choose to delay depending on economic indicators, inflation, and financial conditions. This uncertainty has contributed to the yen's relatively weak performance.
The BOJ's gradual normalization of monetary policy, including the abandonment of negative interest rates in March 2024, has positively impacted Japanese banks. Their profit margins have expanded, boosting bank stock prices. However, rapid rate hikes could negatively affect banks by increasing borrowing costs before they can fully adjust their portfolios.
The BOJ's next policy meeting is scheduled for January 23-24. Ueda is not scheduled to make any public pronouncements before then, but Deputy Governor Ryozo Himino's speech and press conference on January 14 will likely be closely watched for any further hints regarding a potential January rate hike.