On Thursday, Bank of Japan (BoJ) board member Naoki Tamura addressed the market, stating that the BoJ has “no preset idea on the pace of further rate hikes.” When questioned about the possibility of rate increases by the end of the year or by March 2025, Tamura emphasized that Japan’s rate hikes are expected to proceed gradually, in contrast to the more aggressive approaches seen in the US and Europe.
Tamura highlighted that the timing for short-term rates in Japan to reach 1% will depend on prevailing economic and price conditions. Current data suggests Japan’s economic performance aligns with the forecasts provided at the BoJ’s July meeting.
He cautioned against overemphasizing market stability, noting that it could hinder the BoJ’s ability to adjust monetary policy effectively in response to economic and price developments. While acknowledging that market fluctuations should reflect fundamental conditions in the long term, Tamura stressed that significant and rapid market volatility is undesirable. He also mentioned that during periods of market fragility, it is important to allow time for markets to stabilize.
Tamura observed that the weak yen has somewhat reversed, but noted that earlier increases in import costs could still impact consumer inflation with a lag. He indicated that the upward risk to inflation has decreased compared to when USD/JPY was at 160. Consequently, the BoJ plans to implement gradual rate hikes while closely monitoring the impact on economic activity.
Despite these comments, the Japanese Yen saw little movement in response. As of the latest update, USD/JPY had gained 0.32% for the day, trading near 142.80.
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