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Bank of Japan Governor Ueda warned that U.S. tariffs could negatively impact Japan's economy, affecting both global and domestic growth. While corporate sentiment remains positive, recent data show mixed economic signals, with inflation pressures rising amid escalating trade tensions. The BOJ is prepared to adjust monetary policy based on these developments, with interest rate hikes possible if inflation remains sustained.
Japan is on track to sustainably meet the central bank's 2% inflation target, supported by strong consumption and capital expenditure, according to the IMF. While inflation risks are balanced, growth faces potential downside threats, including a global economic slowdown. The BOJ is urged to gradually withdraw monetary support as the economy aligns with forecasts, with expectations of 1.2% growth in 2025 and a slight inflation decrease to 2.4%.
Japan's core inflation eased to 3.0% in February, down from 3.2% in January, driven by government subsidies for utilities and a decline in fresh food prices. Despite this deceleration, inflation remains above the Bank of Japan's 2% target, with rice prices soaring 81% year-on-year. The government is taking measures to alleviate the impact of rising costs on households, while underlying inflation suggests potential interest rate hikes in the near future.
The Bank of Japan maintained its short-term policy rate at 0.5% amid rising global economic uncertainty linked to U.S. tariffs. Governor Ueda highlighted domestic inflation pressures from increasing food costs and wage growth, suggesting potential rate hikes could occur if conditions align with forecasts. The BOJ will reassess its economic outlook in April, with many economists anticipating a rate increase in July.
Morgan Stanley anticipates that both the Federal Reserve and the Bank of Japan will maintain their current policy rates during their March meetings. Fed Chair Powell is expected to emphasize a patient approach to rate cuts amid increasing downside growth risks, while BoJ Governor Ueda will highlight global economic uncertainty, reinforcing a cautious stance.
Bank of Japan Governor Kazuo Ueda remains unfazed by rising bond yields, viewing them as a natural response to market expectations of future interest rate hikes. He emphasized the central bank's commitment to allowing market forces to dictate long-term rates while signaling potential rate increases amid sustained wage and price gains. Despite concerns over global economic uncertainty, the BOJ is expected to maintain its current interest rate at 0.5% during its upcoming policy review, with discussions of a hike possible as early as May.
Bank of Japan Governor Kazuo Ueda remains unfazed by rising bond yields, viewing them as a natural response to market expectations of future interest rate hikes. He emphasized the central bank's commitment to allow market forces to dictate long-term rates while signaling potential rate increases amid sustained wage and price gains. Despite concerns over global economic uncertainty, the BOJ is expected to maintain its current interest rate at 0.5% during its upcoming policy review, with discussions of a hike possible by May.
Former Bank of Japan Governor Haruhiko Kuroda addressed U.S. President Trump's claims of Japan manipulating the yen, emphasizing that Japan is not intentionally weakening its currency. Kuroda highlighted Japan's efforts to support the yen and the BOJ's gradual normalization of monetary policy, including recent interest rate hikes, to achieve sustainable inflation targets.
The Japanese yen has surged to a five-month high against the dollar, reaching 148 yen per dollar, driven by expectations of monetary tightening from the Bank of Japan amid rising inflation. Technical analysis suggests a bearish outlook for USD/JPY, with potential declines towards last year's low of 140, influenced by upcoming US and Japanese economic data.
Bank of Japan Governor Kazuo Ueda highlighted significant global economic uncertainty stemming from U.S. tariff policies, emphasizing the need for careful monetary policy decisions. Following the G20 finance leaders’ meeting, he noted that Japan's economic growth and persistent inflation could lead to further interest rate hikes from the current 0.5% level. Ueda also indicated the BOJ's readiness to intervene in bond markets if yields rise unexpectedly, as the central bank aims to achieve its 2% inflation target sustainably.
Kazuo Ueda
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