The Bank of Japan remains steady but signals a "hawkish" stance! Kazuo Ueda hinted that the next meeting may discuss accelerating interest rate hikes.

At todays conclusion of the monetary policy meeting, the Bank of Japan maintained the policy interest rate at 1% by a majority vote, further reinforcing concerns that the explicit manifestation of rising price risks could negatively impact the economy. In the press conference following the decision, Governor Haruhiko Kuroda adopted a generally hawkish tone, emphasizing the increasing upward risks to the price outlook. He noted that as inflation trends are now very close to the central banks target, any unexpected price increases would come at a higher cost. Kuroda stated, "Given that core inflation is approaching our target of 2% for price stability, we need to be more vigilant about the risks of rising prices than before," and, Based on this understanding, we plan to engage in in-depth discussions starting from the next policy meeting. The following excerpts are from Bank of Japan Governor Haruhiko Kuroda's remarks at the post-meeting press conference: Regarding Inflation Kuroda remarked, Many of our policy board members have relatively high inflation forecasts, and they believe the risks are skewed to the upside. I hope to take this into account when presiding over future policy meetings. Among the factors I am particularly concerned about are several data points regarding medium- to long-term inflation expectations, some of which are showing strength or on the rise. Regarding Interest Rate Increases If we believe the financial environment remains accommodative, we may accelerate the pace of interest rate hikes. If we fail to achieve stable price growth, we may be forced to raise interest rates quickly. This could lead to a sharp increase in nominal rates and trigger market turmoil, which would negatively impact healthy economic growth. Price stability is also crucial for promoting investment. Impact of Exchange Rates The impact of exchange rate fluctuations on inflation may be greater than in the past. In the past year, we have also seen a significant depreciation of the yen. Given that the core inflation rate is nearing 2%, we must focus on the upward risks to prices as opposed to how we approached these in the past... With the core inflation rate so close to 2%, the damage caused by the emergence of such inflation risks would be substantial. We have identified three main factors contributing to inflation risk, with exchange rate changes being one of them. I will not comment on daily market fluctuations. To establish stable interest rates in the market, it is important to appropriately guide monetary policy and lead long-term fiscal policy in a way that maintains market confidence. Impact of AI Demand The impact of demand for artificial intelligence (AI) and exchange rate changes is one of the important risk factors we are monitoring. Starting from the next policy meeting, we will explore how these factors influence the economy and prices, and subsequently discuss monetary policy.