Bank of Japan Governor Kazuo Ueda avoided giving a clear hint that he would raise interest rates at the December meeting during his closely watched comments on Monday that weakened the yen.
In his last major speech before the Bank of Japan’s meeting on December 18-19, Ueda said the timing of the central bank’s next policy adjustment will depend on the economy and prices, as he reiterated his data-driven stance and kept his options open on when to raise interest rates next.
“The actual timing of the adjustments will continue to depend on developments in economic activity and prices as well as future financial conditions,” Ueda told local business leaders in Nagoya on Monday.
The yen fell about 0.5% to 155.14 yen against the dollar and benchmark bond yields fell as Ueda’s comments proved less hawkish than some market participants expected and overnight interest swaps continue to price in a chance of about 54% for a rate hike in December.
After the market volatility that followed the Bank of Japan’s interest rate hike in July, the central bank acknowledged the need to strengthen its communications and this has raised speculation that Ueda will more clearly state the bank’s intentions before its next move.
Ueda noted that the Bank of Japan is on the path to higher interest rates by sticking to its standard line on the issue. He reiterated his position that if the Bank of Japan’s forecasts for economic activity and prices come true, the bank will continue to raise interest rates.
The governor said the bank needs to carefully monitor various risks including the US economy, while also noting that the US is likely to make a soft landing given the recent positive data.
Following last month’s policy meeting, Ueda emphasized that it was no longer necessary to say the bank had “time to think” before making any policy adjustments, as risks from the US economy had largely subsided.
Regarding former US President Donald Trump’s victory in the recent elections, Ueda refrained from going into details and said that it will take some time before the overall picture of Trump’s policies and their effects becomes clearer.
For now, he has stuck to a tone that suggests he is not committed to a specific date for the next rate hike.
“Gradually adjusting the degree of easing in line with the improvement in economic activity and prices will support long-term economic growth,” Ueda said. It will “contribute to achieving the goal of price stability in a sustainable and stable manner.”
