TOKYO- The Bank of Japan will raise interest rates again if trend inflation accelerates toward its 2 percent target as expected, governor Kazuo Ueda said, keeping alive market expectations of a further withdrawal of monetary support later this year.
“If our price forecasts change, that would also be a reason to change monetary policy. But we don’t have any preset idea on the specific timing and pace” of rate hikes, Ueda told parliament on Tuesday.
The remarks come ahead of the BOJ’s two-day policy meeting that ends on Friday, when the board is set to keep interest rates unchanged and announce fresh quarterly growth and inflation forecasts.
The BOJ is likely to project inflation will stay around its 2 percent target for the next three years, sources have told Reuters, which would cement expectations the central bank will raise interest rates again this year from current near-zero levels.
The central bank ended eight years of negative rates and other remnants of its unorthodox policy last month, making a historic shift away from decades of massive monetary stimulus that was aimed at quashing deflation and revitalizing growth.
Ueda said the BOJ must maintain ultra-loose monetary policy for the time being as trend inflation, or price rises driven by domestic demand and measured by scrutinizing various indicators, remains “somewhat below 2 percent “.
