TOKYO, Oct 19 : Bank of Japan Governor Kazuo Ueda said on Monday underlying inflation is "quite close" to the central bank's 2 per cent target with strong global AI demand adding to inflationary pressure from a tight job market.
The remarks came ahead of the central bank's key policy meeting later this month, where it will release fresh quarterly growth and inflation forecasts which will be scrutinised by markets for clues on the next interest rate-hike timing.
"It is becoming more important to anchor underlying inflation around our 2 per cent target," Ueda told parliament.
While rising raw material costs from the Middle East conflict were pushing up inflation, a tight job market and moderate economic recovery were also applying demand-driven price pressure, Ueda said.
"Very strong global AI demand is also boosting capital expenditure and exports, thereby pushing up prices for a wide range of goods," he said.
Ueda also said raising interest rates at an appropriate pace would help avoid spikes in bond yields.
"As underlying inflation approaches 2 per cent and financial conditions remain accommodative, failing to adjust our policy rate appropriately could push up long-term interest rates by stoking market concern over an inflation overshoot," he said.