Bank of Japan Governor Kazuo Ueda: If economic and inflation forecasts are realized, interest rates will continue to rise in the future

According to the Zhitong Finance APP, the Bank of Japan maintained its interest rates on Friday but decided to start selling its held risk assets, taking another step towards gradually phasing out its large-scale stimulus plan. Members of the Bank of Japan's Monetary Policy Committee, Takeda Hajime and Tamura Naoki, opposed keeping the short-term interest rate at 0.5% and proposed raising it by 25 basis points to 0.75%, citing upward risks to price increases. Bank of Japan Governor Ueda Kazuo subsequently held a monetary policy press conference, downplaying food inflation risks while remaining vigilant about tariff risks. He also emphasized that if economic and inflation forecasts are realized, the Bank of Japan will continue to raise interest rates.

Here are excerpts from Ueda Kazuo's speech at the press conference:

Food inflation will gradually fade

Ueda Kazuo stated, "Today's CPI data is basically in line with our expectations... We expect food inflation to gradually fade and not have a significant impact on core inflation. There is a risk that persistent increases in food prices may affect inflation expectations and gradually push up core inflation. On the other hand, there is also a risk that high food prices may suppress consumption of other goods, thereby restraining overall consumption. Neither of these scenarios is our baseline expectation, but we need to be mindful of these risks."

Japan's economy remains resilient

Ueda Kazuo stated, "For the current quarter, there has been a certain degree of decline in exports following a stockpiling surge. Manufacturers' profits have decreased. However, overall, exports remain stable, and corporate profits are still high. Capital expenditure is in good shape. Consumption is slightly weak but still resilient. So far, we have not seen a significant impact of U.S. tariffs on the Japanese economy."

Inflation rate expected to approach 2%

Ueda Kazuo stated, "I personally believe that the core inflation rate is still slightly below 2% but is approaching this level. Regarding the view of Monetary Policy Committee member Tamura Naoki, upward price pressure is certainly one of the risks. However, I believe that given the impact of U.S. tariffs will begin to intensify, we also need to pay attention to the downside risks in the economy and prices."

Limited impact of U.S. tariffs

Ueda Kazuo stated, "Since July, there have been some signs of weakness in U.S. employment and consumption. However, at present, the impact of tariff costs on inflation seems to be relatively mild. The Federal Reserve's rate cuts may support the U.S. economy. As for the Japanese economy, the impact of tariffs is eroding manufacturers' profits. However, so far, it has not had a significant impact on the entire Japanese economy, including employment, wages, and capital expenditure. We expect potential inflation to continue moving towards the 2% target."

Maintaining economic forecasts, but outlook remains uncertain

Ueda Kazuo stated, "We do not need to change the baseline scenario presented in the July quarterly outlook report. The Japanese economy may face pressure from tariffs but is expected to withstand this shock. We expect the core inflation rate to remain stable for a period of time and then gradually rise to 2%."

Ueda Kazuo also stated, "However, the outlook still carries significant uncertainty."

Still considering further interest rate hikes

Ueda Kazuo stated, "Real interest rates remain at extremely low levels. If our economic and price forecasts are realized, we will continue to raise interest rates based on improvements in economic and price conditions Monitoring the Impact of Overseas Tariffs

Kazuo Uetani stated, "There is a great deal of uncertainty regarding the impact of tariff policies in various countries. Therefore, we will carefully examine domestic and international economic conditions as well as market developments without making any assumptions."