By Leika Kihara
NAGOYA- Bank of Japan Governor Kazuo Ueda said the economy was making progress in achieving sustained wages-driven inflation, but gave few clues on whether the central bank could raise interest rates again next month.
Ueda repeated the BOJ’s readiness to keep increasing borrowing costs if the economy behaves in line with its forecast, and signaled that domestic conditions for another rate hike was falling into place.
But he warned of the need to scrutinize external risks such as uncertainty over the US outlook and still-jittery financial markets.
“The timing for when we’ll adjust the degree of our monetary support will depend on the economic, price and financial outlook,” the governor said in a speech on Monday.
The lack of clear guidance nudged up the dollar by 0.4 percent to 154.77 yen as some traders unwound bets that Ueda could drop hints of a December rate hike.
Markets imply around a 55 percent chance of a quarter-point rate hike to 0.5 percent when the BOJ meets on Dec. 19, largely unchanged from before the BOJ chief’s remarks.
A Reuters poll conducted on Oct. 3-11 showed a very slim majority of economists projecting the BOJ to forgo raising rates again this year, although nearly 90 percent expect rates to increase by end-March.
The BOJ ended negative interest rates in March and raised its short-term policy rate to 0.25 percent in July on the view Japan was on the cusp of durably achieving its 2 percent inflation target.
Ueda cited rising inflationary pressure from a weak yen, which boosts import costs, as among factors that led to the July rate hike. That has led many market players to wager that yen moves will be key to how soon the BOJ will next raise rates.
Monday’s comments were Ueda’s first remarks on monetary policy since Donald Trump’s victory in the US presidential election on Nov. 5. – Reuters
