Bank of Japan Governor Kazuo Ueda said on Tuesday that the central bank was ready to keep raising interest rates if underlying inflation moved further towards its 2% annual target.
The BOJ has signaled that underlying inflation, a specific gauge of price pressures based on demand, has remained short of its annual target, even as broader consumer inflation trended well above 2% for at least the past three years.
This has kept the BOJ’s stance mostly accommodative, even as the central bank last year kicked off a rate hike cycle– its first one since 2008– which ended nearly a decade of ultra-loose monetary policy.
"Once we have more conviction that underlying inflation will approach 2% or hover around that level, we will continue to raise interest rates to adjust the degree of monetary support," Ueda told parliament, according to comments carried out by Reuters.
Recent economic data showing a sustained uptick in Japanese inflation, coupled with resilience in the economy, spurred bets that the BOJ will next hike rates in July.
But uncertainty over U.S. trade tariffs and their economic impact, especially as Japan holds out for a positive trade deal, could stay the BOJ’s hand.
Japanese Prime Minister Shigeru Ishiba also warned that a trend of higher interest rates could dent plans for government spending.
