BOJ chief flags inflation overshoot risk, stresses importance of 2% anchor

Bank of Japan Governor Kazuo Ueda cautioned on Friday about the potential for underlying inflation to exceed the central bank's 2% target, emphasizing the need to keep price pressures in check. Speaking at a credit union meeting, Deputy Governor Shinichi Uchida relayed Ueda's concerns, noting that geopolitical tensions, AI-driven demand, and currency fluctuations could impact Japan's economy and inflation.

Ueda stressed that ensuring underlying inflation remains near the 2% target is now more critical than ever, warning that an overshoot could negatively impact the economy. The speech echoed remarks Ueda had made earlier, ahead of the BOJ's upcoming policy meeting on October 29-30, where the bank plans to unveil new growth and inflation forecasts.

The BOJ recently hiked its key interest rate to a 31-year high, signaling a shift toward preventing underlying inflation from exceeding its target, potentially leading to more stringent monetary policy.