Bank of Japan Governor Kazuo Ueda said on Tuesday that the central bank intends to continue tightening monetary policy as long as financial conditions remain accommodative, and that officials will deliberate whether inflation is unfolding in line with expectations.
Speaking at a news conference after the G20 finance leaders' session, Ueda said the BOJ will discuss this month whether upside risks to inflation are mounting, according to comments carried by Reuters.
Ueda noted that underlying inflation is now quite close to the BOJ's 2% goal, and he said the bank must be particularly mindful of inflationary risks when setting its policy guidance. That proximity to target, he indicated, requires heightened attention to how price pressures could evolve.
The governor also said the central bank needs to carefully examine how the cumulative effect of earlier rate hikes is affecting the broader economy. That scrutiny, he said, should factor into future policy moves.
The BOJ is scheduled to meet later in September. Market participants have largely priced in a rate increase at that meeting, a view underpinned by Japan's rising inflation and the yen's weakness.
Context and implications
Ueda's remarks underscore the central bank's current posture: a willingness to continue raising rates while monitoring incoming data for signs that inflation is becoming self-sustaining. The comments make clear the BOJ will balance the risk of higher inflation against the economic impact of its earlier tightening cycle.
How the BOJ judges the cumulative impact of past hikes will likely influence the timing and magnitude of any further increases. With markets expecting action in September, the bank's internal debate over upside inflation risks will be closely watched by investors and currency traders.