Figure : Bank of Japan, Tokyo
As Japan continues to recover from years of economic stimulus, Bank of Japan (BOJ) Governor Kazuo Ueda has suggested that the central bank may soon adjust interest rates — but only if confidence in the economic outlook improves.
Speaking to reporters in Washington after a G20 meeting, Ueda made it clear that the BOJ is keeping its options open. While no final decision has been made, he stated that any changes to the bank’s current policies would depend on data and how likely Japan is to meet its inflation and growth targets.
Ueda emphasized the importance of observing incoming global and domestic data before the bank’s next meeting, scheduled for the end of October. He said that he plans to keep monitoring economic indicators and developments from international discussions before determining whether a rate hike is needed.
Despite speculation earlier this year that the BOJ might tighten policy in October, market expectations have recently shifted. Political changes, including the unexpected election of Sanae Takaichi as leader of Japan’s ruling party, have reduced the likelihood of an immediate rate change. Takaichi has publicly opposed tightening, leading many investors to believe the BOJ will hold off for now.
Currently, traders estimate only a small chance of a rate hike this month, a sharp decline from previous expectations. Analysts now believe December may be a more likely time for any potential adjustment.
Meanwhile, Japan’s currency has taken a hit. The yen recently dropped to its lowest value in eight months against the U.S. dollar, adding pressure on the BOJ to take action. Ueda has been careful not to make statements that could further weaken the yen or stoke inflation fears.
The situation is further complicated by political instability. The ruling coalition recently lost support from a key partner, which may make it harder for Takaichi to officially become prime minister. At the same time, she is seeking support from other parties, while opposition groups consider forming alliances.
Even though the political environment is uncertain, Ueda stressed that the BOJ’s decisions will continue to be based on economic conditions, not politics. He also noted that global factors — such as U.S. economic performance, trade tensions, and the impact of tariffs — remain important when considering Japan’s financial strategy.
At the G20, Ueda said that while the global economy has shown resilience, risks remain, especially from ongoing trade and geopolitical issues. These challenges could affect both global growth and financial stability in the months ahead.
For more please read : Reuters, Bloomberg
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