Bank of Japan Governor Kazuo Ueda stated on October 30 that despite keeping the benchmark interest rate unchanged, inflationary pressures remain, and the central bank will continue its rate hike trend.
During a press conference following the monetary policy meeting, Ueda noted that the core inflation rate is generally in line with the 2% target but emphasized, "It is important that 2% is achieved sustainably and stably, and we have not yet reached that point." He added, "This is not a victory declaration regarding our inflation target," and affirmed that monetary policy will be adjusted to ensure the 2% inflation rate becomes entrenched.
Ueda described the current financial environment as "accommodative" and stated that the bank will thoroughly analyze economic, inflation, and financial conditions at each meeting, keeping in mind that the policy landscape is changing. However, he refrained from confirming the possibility of a rate hike at the December meeting, saying, "We will assess each meeting, including the next one."
He particularly highlighted that companies are actively pursuing wage and price increases, warning that there is a risk of the core inflation rate moving above 2%. Ueda explained that the assessment of core inflation was unanimously agreed upon by all nine policy board members, including Takata Hajime, who opposed the rate freeze. He attributed the rise to the effects of extensive monetary easing, global inflation, and the spread of wage and price increases due to labor shortages. He stated that monitoring whether medium- to long-term inflation expectations stabilize around 2% will be crucial.
Regarding the large-scale monetary easing that began in 2013, Ueda acknowledged that it has had some effect but assessed that it did not produce the strong results needed to achieve the 2% target within the initially set two-year timeframe.
According to the Yomiuri Shimbun, the Bank of Japan projected during its September meeting that the core inflation rate would reach the target level in the latter half of 2026 to 2027. The bank has now assessed that it already meets that level.
Ueda stated that the declaration of an exit from deflation is a matter for the government to decide. He also declined to comment on the possibility of reviewing the 2013 joint statement between the government and the Bank of Japan that includes the 2% target.
Earlier on the same day, the Bank of Japan decided to keep the policy interest rate at 1.25%. Ueda explained that the reason for the freeze was to observe the impact of the September rate hike on the economy and inflation. Takata suggested raising the rate to 1.5%, arguing that the core inflation has reached the target, but this proposal was rejected.
Additionally, the Bank of Japan announced that it would increase the annual sale of its listed exchange-traded funds (ETFs) from 330 billion yen to 860 billion yen, effective January 2027. This change will reduce the time required to sell all holdings from approximately 112 years to about 43 years. Ueda cited the rise in stock prices and a surge in trading volume since the decision to sell was made a year ago as reasons for this adjustment. He noted that the previous pace of sales had not made significant progress and assessed the market impact as "limited."
According to Nikkei, Daiwa Securities' chief strategist Shuji Hosoi evaluated that an annual sale of 860 billion yen does not warrant excessive concern about stock supply. However, former Bank of Japan policy board member Takahide Kiuchi, now an executive economist at Nomura Research Institute, predicted that the bank could increase the pace of sales further, as its market share remains small.
* This article has been translated by AI.
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