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Bank of Japan Governor Kazuo Ueda said on Monday that the central bank will continue to raise interest rates if economic activity and price trends evolve in line with its projections, reinforcing its commitment to policy normalisation.
Speaking to a banking sector lobby, Ueda said Japan’s economy maintained a moderate recovery last year, even as higher US tariffs weighed on corporate profits. He noted that wages and prices are likely to rise together at a moderate pace, creating conditions for more sustainable economic growth.
“Wages and prices are highly likely to rise together moderately,” Ueda said, adding that adjusting the degree of monetary accommodation would support the transition to steady, long-term growth.
The BOJ last month raised its policy rate to 0.75 per cent from 0.5 per cent, the highest level in 30 years, marking another significant step away from decades of ultra-loose monetary policy and near-zero borrowing costs. Despite the increase, real interest rates remain deeply negative, with consumer inflation staying above the central bank’s two per cent target for almost four years.
Market attention is now focused on the BOJ’s quarterly outlook report due at its January 22–23 policy meeting, which is expected to provide clues on how policymakers assess inflationary pressures, particularly those stemming from the recent weakness of the yen.
The depreciation of the yen has pushed up import costs and broader inflation, prompting some BOJ board members to argue for further, gradual rate increases. On Monday, the dollar rose 0.2 per cent to ¥157.08 after touching ¥157.255, its highest level since December 22.
Expectations of additional rate hikes have also driven bond yields higher, with the benchmark 10-year Japanese government bond yield briefly reaching a 27-year high of 2.125 per cent.
Also speaking to the banking lobby, Finance Minister Satsuki Katayama said Japan was at a critical juncture as it shifts from a deflation-prone economy toward one driven by sustainable growth.
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