Asia FX muted, dollar fragile as CPI data boosts Sept rate cut bets
Investing.com-- The Bank of Japan remains ready to raise interest rates further amid resilience in the Japanese economy and sticky inflation, Governor Kazuo Ueda told the Parliament on Wednesday.
Ueda noted that recent increases in Japanese inflation were driven largely by temporary factors such as high import costs and rising food prices, which were likely to dissipate in the coming months.
But any signs of inflation remaining sticky for longer than expected could invite higher interest rates.
"If the economic and price outlook outlined in the (BOJ) Outlook Report is realized, we will continue to raise policy interest rates and adjust the level of monetary easing,” Ueda told the parliament.
Ueda’s comments come just a week after the BOJ voted to keep interest rates unchanged, as it gauged the impact of a 25 basis point hike in January.
The central bank also warned of uncertainty over foreign trade policies, especially the threat of more tariffs under U.S. President Donald Trump. Ueda repeated these uncertainties on Wednesday.
The BOJ Governor largely reiterated the bank’s stance on interest rates rising gradually as inflation steadies around its 2% target, and as Japan’s economy remains in expansion.
Ueda’s comments also largely repeated the BOJ’s stance of weaning the economy off monetary support, after he oversaw a historic end to the BOJ’s ultra-loose policy in 2024.
Still, Softer-than-expected purchasing managers index data for March raised some questions over the Japanese economy, as both manufacturing and services activity cooled.
Focus this week is on Tokyo consumer price index inflation for the month, due on Friday, for more cues on the path of inflation and interest rates.