Bank of Japan Governor Kazuo Ueda: No preset path for interest rate hikes, but the economy is on track

According to the Zhitong Finance APP, on Thursday, the Bank of Japan announced that it would maintain interest rates unchanged, while reiterating that if the economic trajectory meets expectations, it will continue to push for interest rate hikes, shifting investors' focus to the earliest possible rate increase in December.

Although the Bank of Japan has largely maintained its long-term economic forecasts, it detailed potential overseas risks that could affect Japan's economic recovery, highlighting its focus on economic growth issues.

Below are excerpts from the remarks made by Bank of Japan Governor Kazuo Ueda at the post-meeting press conference:

Impact of Trade Policy

"The economic outlook faces various risks. In particular, the impact of trade policy on overseas economies and price trends remains highly uncertain."

Economic Forecast

"Currently, our economic forecast has not changed significantly compared to the previous report released in July. The likelihood of the baseline forecast becoming a reality has slightly increased."

Wages and Prices

"We would like to take some more time to carefully observe the changes in wages and prices. More data will be available in the future, reflecting how companies respond to the 15% tariff pressure, as well as wage-setting plans including next year. We need to confirm whether wages and prices will gradually rise in sync."

Inflation

"Food inflation is gradually slowing, while core inflation is rising moderately. The current economic trajectory aligns with our baseline scenario, so we believe we are not lagging behind the economic situation. We will continue to monitor core inflation trends while closely tracking whether sustained increases in food prices will pose upward or downward risks to the price outlook."

Interest Rate Hike Related

"We have not preset any position regarding the timing and feasibility of interest rate hikes."

Related to the Suga Administration

"We will continue to maintain close communication with the government."

U.S. Economy

"The demand in the artificial intelligence (AI) sector has exceeded expectations. The impact of tariffs seems to have been significantly delayed, but it may still have a considerable impact on consumption and the overall economy... Even if tariff impacts U.S. consumption, it will be a gradual process. Therefore, the risks facing the U.S. economy may be lower than we anticipated in April. However, the impact of the U.S. government shutdown on the economy may exceed expectations, and we will continue to closely monitor related developments."

Response to Bessent's Call for BOJ Rate Hike

"I cannot directly comment on this. We will formulate economic and price outlooks and adjust the intensity of monetary easing when the likelihood of our forecasts being realized increases."

Domestic Consumption

"Wages are currently rising moderately, but high prices for essential goods such as food are putting pressure on non-durable goods consumption, the service industry, and dining out demand. However, consumer confidence is gradually recovering, so we expect consumption to remain resilient. The future trajectory will depend on the results of next year's wage negotiations."

Neutral Interest Rate

"Unfortunately, due to various uncertainties, we are still unable to narrow down the estimated range for Japan's neutral interest rate."

Decision to Maintain Interest Rates Unchanged Today

"Although uncertainties related to trade policy and their impact on overseas economies and the U.S. economy may have diminished, risks still exist. In the short term, we hope to further observe data to assess the direction of next year's wage negotiations." **

Yen Exchange Rate Fluctuations

"I am not in a position to comment on short-term fluctuations in exchange rates. The ideal situation is for exchange rates to fluctuate steadily based on economic fundamentals. We will always pay attention to the impact of exchange rate fluctuations on the economy and prices, including the driving factors behind exchange rate changes."