Bank of Japan Governor Kazuo Ueda stated that Japan “still has some way to go” to achieve its 2% inflation target, a remark that pushed the yen weaker.
Although he denied the possibility of a rate cut, emphasizing that the current interest rate is too low and needs to be raised at an appropriate time in the future, the market still believes that the timing of the rate hike may be postponed.
Nomura Securities indicated that the Bank of Japan may face “considerable obstacles” to raising interest rates this year. These obstacles include the impact of US tariffs, the Japanese government’s economic stimulus measures, and the drafting of the 2026 fiscal year budget.
Due to US tariffs, wage growth in March and April 2026 may be lower than expected, and potential inflation growth may temporarily slow down.
However, Ueda also said that if the central bank is more convinced that potential inflation will reach the 2% target, it will continue to raise interest rates. The Bank of Japan kept the real interest rate negative to ensure that potential inflation reached and stabilized around 2%.
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