BOJ deputy chief signals further rate hikes

The Mainichi

5 days ago

KOCHI (Kyodo) -- One of the Bank of Japan's deputy chiefs on Wednesday reiterated the bank's readiness to pursue a path toward monetary normalization if the Japanese economy and inflation move in line with expectations, while noting uncertainties regarding U.S. tariffs.
"Given that real interest rates are at significantly low levels...the bank, in accordance with improvement in economic activity and prices, will continue to raise the policy interest rate," BOJ Deputy Governor Shinichi Uchida said in a speech in Kochi, western Japan.
Saying it is not yet clear how economic activity and prices at home and abroad will develop, Uchida said he will pay close attention to the economic data "as there are extremely high uncertainties and as domestic and overseas economies seem to be at a critical juncture."
Uchida's remarks came hours after U.S. President Donald Trump said that he has struck a "massive" trade deal with Japan, under which Tokyo has agreed to a "reciprocal tariff" of 15 percent, lower than earlier proposed.
In his speech, Uchida did not directly address the newly announced deal.
Expressing concern about the potential downward pressure on prices in Japan from U.S. trade policy, Uchida also noted upward pressure from cost-push factors, particularly in food prices.
"My attention will therefore be on how such upward and downward pressure may affect the outlook for prices through, for example, firms' wage- and price-setting behavior."
The BOJ has shifted from a decade of unorthodox easing, lifting its key rate three times since March last year.
But the central bank kept its benchmark rate unchanged at 0.5 percent at its June policy meeting, the third straight gathering without a policy adjustment, with Trump's tariffs clouding the outlook for Japan's export-oriented economy.
The BOJ will hold a two-day policy meeting from July 30, during which it is set to issue its updated quarterly outlook for growth and inflation.