BOJ's Ueda Signals Further Tightening Amid Inflation Risks

Following the BOJ's policy decision earlier in the day, Governor Ueda made these key remarks during his press conference:

• Japan's economy is expected to keep expanding at a moderate pace.
• Core inflation is nearing the 2% target.
• There is a chance that core inflation could exceed the 2% price goal.
• Financial conditions in Japan have remained accommodative.
• The BOJ intends to keep raising its policy rate and fine-tuning the level of monetary easing according to economic activity and prices.
• The timing and speed of adjustments will be considered by looking at the probability of meeting the economic and price forecast baseline.
• It is crucial to stabilise core inflation at roughly 2%, and the risks of overshooting are increasing.
• Ueda noted that the policy phase has changed, with a significantly altered short-term objective.
• Achieving the 2% target more stably is becoming increasingly important.
• He said the BOJ is not considering rate hikes at any particular time.
• Risks will be evaluated at each policy meeting.

Ueda refrained from discussing the dissents and their potential impact on the BOJ. However, he confirmed that the central bank remains on track to tighten policy further based on recent economic and inflation developments.

Ueda avoided making any advance commitments on the timing or pace of future rate increases, but he kept the possibility open for now.

The initial remarks suggest he is not significantly troubled by the dissents from Asada and Sato, sending a key signal to markets that the BOJ can still act as needed even if the dissenting members appointed by Takaichi maintain their positions.

The USD/JPY pair dropped from 157.10 to 156.70, trimming some of its earlier gains for the day.