On Tuesday afternoon, Kazuo Ueda, the governor of the Bank of Japan (BOJ), held a press conference following the BOJ’s decision to maintain the current interest rate level and slow down the pace of balance sheet reduction. Ueda emphasized that while bond purchases should be reduced to allow long-term yields to fluctuate more freely, a rapid reduction could undermine market stability. He noted that concerns about bond market volatility led to the decision to slow the pace of bond purchase reductions.
Ueda explained that the decision to reduce bond purchases was based on market trends observed in April and May, and a mid-term assessment of the bond purchase plan will be conducted in June next year.
Regarding the economic and inflation outlook, Ueda stated that the Japanese economy is recovering moderately, with no significant changes in prices. However, inflation expectations have yet to stabilize at the 2% target. He indicated that if the economic outlook aligns with expectations, interest rates could be raised, though he did not comment on the possibility of a near-term rate hike.
Ueda also highlighted potential secondary impacts on inflation from rising food prices and geopolitical tensions in the Middle East, noting that he would closely monitor developments in the region. He reaffirmed the high degree of uncertainty surrounding trade policy and suggested that its impact might become more evident in the coming months.
Additionally, he pointed to deteriorating global sentiment data and the increasing importance of assessing broader economic indicators.
During Ueda’s speech, the US dollar gained ground against the Japanese yen. As of the time of publication, the USD/JPY pair rose slightly by 0.1% to 144.88.
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