"Interest Rate Decision Will Be Made After Comprehensive Review of Information and Data at the Time of the Meeting"
"Tariff Impact Has Been Delayed... Possibility Remains"
Kazuo Ueda, Governor of the Bank of Japan (BOJ), who is set to chair the Monetary Policy Meeting on the 29th and 30th, stated regarding a potential interest rate hike, "We will discuss and make a decision by comprehensively considering information and data at the time of the meeting." He reiterated his previous stance, saying, "There is absolutely no change in our position to appropriately adjust the degree of monetary easing depending on the certainty of the economic outlook."
According to Bloomberg and the Nihon Keizai Shimbun (Nikkei) on the 16th (local time), Governor Ueda made these remarks at the G20 Finance Ministers and Central Bank Governors Meeting held in Washington, D.C., United States. He said, "We determine monetary policy based on the economic and price outlook, the associated risks, and the accuracy of those projections."
His remarks suggest that the decision will be postponed until the last minute of the meeting, but the possibility of an interest rate hike remains open. Bloomberg explained that Governor Ueda's reaffirmation of the BOJ's stance indicates that the central bank has not ruled out a rate hike in October, even amid domestic political turmoil in Japan and escalating U.S.-China trade tensions.
Notably, Governor Ueda's comments were his first since Sanae Takaichi was elected as the new president of the Liberal Democratic Party (LDP), making them particularly significant. President Takaichi, who is committed to continuing Abenomics, has previously expressed a critical view of the BOJ's interest rate hike policy. After her election, market expectations for an October rate hike diminished.
Bloomberg pointed out that Japan's political uncertainty is further complicating the interest rate hike situation. With Komeito, the LDP's long-standing coalition partner, having left the alliance, President Takaichi's prospects of becoming Japan's first female prime minister have become unclear. Currently, the LDP is seeking cooperation with the Japan Innovation Party, the second-largest opposition party, while other opposition parties are forming a united front against the LDP. However, the outlet added that continued yen depreciation could increase pressure on the BOJ to act before inflation worsens.
When asked about the impact of Japan's domestic political instability on monetary policy decisions, Governor Ueda did not provide a specific answer.
Regarding the impact of tariff policies, he predicted that while it has not materialized yet, it could become apparent in the future. He said, "Compared to the outlook in March and April, the global economy and the U.S. economy have remained fairly robust so far," adding, "One reason is that the impact of tariffs has been somewhat delayed." He continued, "However, there is still a possibility that this impact will become visible going forward, and it cannot be excluded from forecasts or downside risks, as assessed by various institutions and experts."
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