Bank of Japan Governor Kazuo Ueda said the central bank will not tolerate underlying inflation running above its 2% target and will press ahead with interest rate increases.
Ueda made the remarks at a news conference on the 16th in Bangkok, where finance ministers and central bank governors of the Group of 20 were meeting, according to the Nihon Keizai Shimbun, Reuters and other foreign media on the 17th.
"Underlying inflation is broadly close to our 2% target, so we cannot tolerate it rising further," Ueda said. "Our policy stance has recently shifted into a phase in which anchoring inflation near the 2% target becomes an important policy goal." On financial conditions, Ueda said the environment has remained accommodative even after last month's rate increase, adding that the central bank "will continue to adjust the degree of easing by raising the policy rate." He said the BOJ would review the issue at its next monetary policy meeting.
The comments came ahead of a key BOJ monetary policy meeting later this month. Board members will present new quarterly projections for growth and prices at the gathering, which markets are expected to scrutinize for clues on the pace and timing of further rate increases. At last month's meeting, the BOJ raised its short-term policy rate, the benchmark, by 0.25 percentage points to about 1.25% from about 1.0%.
Financial markets largely expect the BOJ to hold rates steady at this month's meeting, with attention turning to whether it will deliver another increase at its December gathering, the Nikkei reported. Reuters, citing sources, said many within the central bank favor keeping rates unchanged at the meeting later this month and waiting for more data showing how the increases so far have affected the economy and financial conditions, while adding that the BOJ is expected to send hawkish signals leaving the door open to a December hike.