BY LEIKA KIHARA AND MAKIKO YAMAZAKI
TOKYO — Bank of Japan Governor Kazuo Ueda said on Tuesday the central bank will raise interest rates once it is convinced enough that economic and price growth will re-accelerate after a period of stagnation.
Ueda also signaled the central bank will continue to taper its huge bond buying even after an existing plan running through March expires, underscoring its resolve to stay on course for a slow but steady withdrawal of ultra-easy policy.
The hit from higher US tariffs on Japan’s economy could first come from a drop in exports, which could hurt corporate profits and consumer sentiment, Ueda said.
“US tariffs could weigh somewhat on Japanese companies’ winter bonus payments and next year’s wage talks with unions,” Ueda told parliament.
“Wage growth may slow somewhat. But we expect economic and wage growth to re-accelerate” and keep consumption on a moderate uptrend, he added.
The BOJ ended a massive stimulus last year and in January raised short-term interest rates to 0.5 percent on the view Japan was on the cusp of durably hitting its 2 percent inflation target.
While the central bank has signalled a readiness to raise rates further, the economic repercussions from higher US tariffs forced it to cut its growth forecasts in May.
Stubbornly high food prices, blamed largely on rising import costs and soaring rice prices, have also complicated the BOJ’s rate decisions by simultaneously hurting consumption and keeping headline inflation well above its target.
