Kazuo Ueda: The Bank of Japan may continue to raise interest rates, focusing on the prospects of a "soft landing" for the US economy

According to the Wisdom Financial APP, the Bank of Japan kept interest rates unchanged at 0.25% on Friday, in line with market expectations. The Bank of Japan also raised its assessment of consumption, indicating that the Bank of Japan believes a strong economic recovery will allow it to raise interest rates again in the coming months.

Bank of Japan Governor Haruhiko Kuroda held a press conference after the policy meeting. He emphasized that the Bank of Japan will closely monitor the development of the economy, prices, and financial markets when deciding on monetary policy. If the economic and inflation trends meet expectations, the Bank of Japan will raise interest rates. Kuroda also stated that the outlook for overseas economic development is highly uncertain, especially the need to monitor whether the U.S. economy will achieve a soft landing.

Here is a summary of Kuroda's speech:

Interest Rates

"Our decision on monetary policy will depend on the economic, price, and financial developments at the time. Japan's real interest rates remain extremely low. If our economic and price forecasts materialize, we will raise interest rates and adjust the degree of monetary support accordingly."

Economic Outlook

"The outlook for overseas economic development is highly uncertain. The market remains unstable. Currently, we need to carefully observe the development of these situations."

Price Target

"We will carefully study how these risks affect our outlook and the likelihood of achieving our price target."

Exchange Rate

"As for recent exchange rate movements, the risk of inflation overshooting due to rising import prices has significantly decreased. Therefore, we have some time to decide on policy."

Nominal Wages

"Wages must rise in a way that is consistent with achieving our sustainable price target. Nominal wages are rising, reflecting strong wage negotiation outcomes pushing up income. Bonuses are also increasing. We expect wages to continue to rise."

Is the Market Stabilizing?

"It is difficult to say how long it will take to determine (whether the market has stabilized). We do not have a specific deadline. But one factor we hope to focus on is whether the U.S. economy will achieve a soft landing, or if the economic slowdown will worsen."

Wage Negotiations

"We hope that next year's wage negotiations will make good progress. But we must carefully study how overseas economic developments will affect business activities and profits."

Widespread Wage Increases

"The range of wage increases is expanding, but some small companies are struggling. We hope to carefully study whether the range of wage increases will widen."

Japanese Economy

"From consumption and other data, the Japanese economy is on track, in line with our forecasts. Based on domestic data in Japan, we may even raise inflation expectations. However, the uncertainty of the U.S. economic outlook has intensified. This has offset some of our optimism about inflation expectations."

Neutral Interest Rate

"So far, we have not narrowed down the estimated level of Japan's neutral interest rate... We need to deepen our analysis, including the impact of the two rate hikes this year."

"When we talk about the estimated lower limit of Japan's neutral interest rate, we do not have a specific level in mind. When we approach that level, we may not necessarily slow down. But we will pay special attention to the impact of past rate hikes." August Inflation

"Inflation in August was slightly stronger than expected. Part of the reason is the impact of the weak yen. Including other one-off factors, many of these factors will dissipate. On the other hand, with wages rising, service prices are also increasing, consistent with our forecast. This is putting upward pressure on inflation. We need to consider all these factors comprehensively. We also need to consider overseas uncertainties and market trends."

Key Factors in Policy Making

"One key factor is whether wages will steadily rise, including the impact of expected minimum wage increases. Another factor is whether companies will continue to pass on rising labor costs to service prices. The results of next year's wage negotiations are crucial, as is whether consumer spending will remain robust."

Potential Risks of Rate Hikes

"In general, countries formulate monetary policies to achieve economic and price stability, so there may be differences in monetary policy cycles among countries. It is clear that the United States has entered a rate-cutting cycle. If this leads to a soft landing for the U.S. economy, the negative impact on the Japanese economy will not be too significant. However, if the U.S. economy faces a more severe adjustment, we may need to change this view."