- Want to gauge neutral rate estimate taking into account accumulative impact of past rate hikes on financial conditions, domestic prices
- Hard to say anything clear about Japan’s neutral rate of interest
- Takeaway from this week’s meetings was to exchange views with other policymakers on how Middle East conflict and AI demand could affect global, Japanese economies and inflation
- As we have said, our policy has entered a new phase as underlying inflation is quite close to 2%, we cannot allow inflation to rise further
- As underlying inflation is quite close to 2%, it is becoming more important than before to anchor inflation around our target
- Haven’t been in touch with US Treasury Secretary Bessent since we met in Asheville
- Timing, pace of future rate hikes will be decided looking at impact of FX, AI demand and Middle East developments on prices
- We will discuss at upcoming meeting whether to tweak our assessment that underlying inflation is approaching 2%
- Did not hear anything at this week’s meetings that deviated from our baseline view
- Economic, price moves roughly in line with our forecasts
- We will continue to raise interest rates as underlying inflation approaching 2%, financial conditions are accommodative
- I felt that there were more policymakers at this meeting who were somewhat more bullish on AI demand than we had estimated
- No big gap in view between what we have assessed on inflationary pressure from AI demand, and what I heard from global policymakers
Bank of Japan Governor Kazuo Ueda said at the IMF meetings that the BOJ will continue to raise interest rates, with underlying inflation approaching 2% and financial conditions still accommodative. The BOJ policy rate is currently at 1.25% and the market sees little chance of a hike at the October 30 meeting but that rises to 75% for the December 18 meeting.
Ueda said policy has entered a new phase and that the BOJ cannot allow inflation to rise further. With underlying inflation quite close to target, anchoring it around 2% is becoming more important than before. He said the BOJ will discuss at its upcoming meeting whether to tweak its assessment that underlying inflation is approaching 2%.
The timing and pace of future hikes will depend on the impact of FX, AI demand and Middle East developments on prices. Economic and price moves are roughly in line with BOJ forecasts, and he said nothing he heard at this week’s meetings deviated from the baseline view.
On AI, Ueda said more policymakers than expected were bullish on AI demand, but there was no big gap between the BOJ’s assessment of AI-driven inflation pressure and what he heard from global counterparts.
He said Japan’s neutral rate remains hard to pin down. Ueda exchanged views with Fed Chair Warsh but declined to comment on the discussion, and said he hasn’t been in touch with Treasury Secretary Bessent since they met in Asheville, which is notable on the intervention front.
USD/JPY is flat today at 158.00 while the US dollar is broadly weaker elsewhere.
This article was written by Adam Button at investinglive.com.