BOJ governor Ueda vows to stay on the path of raising interest rates

Forecasts an economic slowdown for the coming fiscal year as Middle East tensions weighBut overall, economic outlook remains stable although conditional on supply chain situationFor now, Japanese economy shows moderate recovery signs despite some weaknessThat outlook assumes no major supply chain disruption thoughBOJ will keep raising interest rates while adjusting level of monetary supportThat will be according to changes in economic, price, and financial conditionsBoard member Takata recommended adding a reference that inflation target has been achievedRising oil prices may have greater impact on inflationBut policymakers need to be alert to the risk of additional economic slowdown due to supply shockBOJ has kept main scenario unchangedHowever, the odds are now lower for the outlook to be realisedWill act appropriately to avoid lagging behind the curveBut seeks more time in assessing Middle East conflict and the impact on economy, pricesUnderlying inflation remains slightly below the 2% targetThe comments follow from the BOJ policy decision earlier, in which the central bank left the short-term interest rate unchanged at 0.75%. However, three policymakers – namely Takata, Tamura, and Nakagawa – dissented against the decision in voting to raise interest rates to 1.00%. As such, that saw a 6-3 vote split among the BOJ board on the decision.Ueda’s remarks are keeping in line with their decision but doesn’t signal too much urgency at the balance. The fear for the BOJ is that they are now needing to respond to cost-push inflation and that may derail economic conditions. That especially since the government is also needing to balance out the fiscal side of things.And the main concern now is that markets are already pricing in this degree of tightening. So, the BOJ has to deliver at some point or risk the Japanese yen imploding further. And that will open up a whole different can of worms.It’s a tough task. And they won’t be the only ones having trouble navigating the current storm. From yesterday: Major central banks are up against a very tough task in navigating monetary policy next
This article was written by Justin Low at investinglive.com.

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