BOJ Governor Ueda’s comments at news conference

On September 18, the Bank of Japan announced a record-high interest rate increase, joining other major central banks in combating persistent inflation, primarily driven by rising oil prices. However, the expected move did not bolster the yen, which instead weakened due to concerns over insufficient hawkish signals and two dissenting voices advocating for patience in raising borrowing costs.

In his post-meeting news conference, Governor Kazuo Ueda discussed the implications of the rate hike. He emphasized the need to avoid over-tightening financial conditions, which could lead to significant adjustments in asset prices. Ueda acknowledged the difficulty in determining the precise neutral and terminal rates, suggesting that as policy adjustments are made appropriately, the exact rates may become clearer.

Ueda clarified that there were no preset intervals for future rate hikes, stating that each policy meeting would determine the most effective approach to stabilize underlying inflation at 2%. Previously, the focus had been on pushing up underlying inflation below 2%. Now that inflation is nearing the target, Ueda highlighted the importance of preventing overshooting, which could negatively impact the Japanese economy.

He underscored the need to maintain underlying inflation at the 2% mark, marking a shift in the Bank of Japan's policy phase.