Kazuo Ueda, Governor of the Bank of Japan, or BOJ, said at a seminar in Tokyo on October 6 that the BOJ will raise its policy interest rate as necessary to keep inflation stable, while also watching risks that could push prices higher. Ueda said core inflation is beginning to move closer to the BOJ's 2% target and financial conditions remain accommodative, so the BOJ is expected to continue raising its policy rate and reducing the degree of monetary easing, alongside assessing economic conditions, prices, and the financial situation. Kyodo News reported that inflationary pressure in Japan is building from higher crude oil prices, a weaker yen, and rising demand for artificial intelligence-related goods, and these higher costs are increasingly being passed on to consumers. He also said the Japanese economy is recovering gradually, albeit with some weakness, partly as a result of tensions in the Middle East, and stressed that the timing and pace of further rate hikes will depend on economic and price conditions as well as risks affecting the economic outlook. At its meeting on September 18, the BOJ decided to raise its interest rate by 0.25% to 1.25%, while signaling that it may raise rates again in the future.
BOJ signals further rate hikes, pushing JGB 10Y yield up (bond price down).
BOJ readiness to raise rates again supports the yen via tighter policy.
