Bank of Japan Governor: Further Monetary Tightening Possible if Expected Path Materializes

The Bank of Japan's interest rate is currently at 0.75%, its highest level in three decades.

Governor Kazuo Ueda stated that the bank will continue to raise interest rates if economic and price trends align with expectations, signaling Tokyo's preparedness to further shift away from its long-standing monetary easing policies.

Ueda explained that the Japanese economy sustained moderate recovery over the past year, despite corporate profit pressures from higher US tariffs.

He added that both wages and prices are likely to rise moderately, and that adjusting the degree of monetary support will help achieve sustainable economic growth.

In December, the BOJ raised its interest rate by 25 basis points to 0.75%, marking a significant move away from years of near-zero rates.

Despite this increase, Ueda pointed out that real borrowing costs remain significantly negative, as inflation has exceeded the bank's 2% target for almost four consecutive years.

This scenario offers policymakers further leeway for action if necessary.

Markets are now focused on the upcoming quarterly outlook report, to be released after the BOJ board meeting on January 22-23, for clearer signals on the bank's inflation risk assessment, particularly in light of the weak yen and its potential impact on prices.