Bank of Japan (BoJ) Governor Kazuo Ueda stated on Tuesday that the Japanese economy is experiencing a modest recovery despite some ongoing weaknesses. He highlighted improving corporate profits and solid business sentiment, though warned that slower growth abroad could dampen economic momentum.
Ueda noted that import-driven inflation pressures are expected to ease, but uncertainties around global trade policies and economic conditions remain exceptionally high. He reaffirmed the BoJ’s readiness to raise interest rates if economic and price trends align with forecasts, emphasizing the importance of making decisions free from preset biases.
“Our baseline scenario could change significantly,” Ueda said, stressing the need for close communication with the government and continuous monitoring of corporate financing through BoJ networks. He clarified that there is no fixed plan for rate hikes, which will be pursued only if economic and price outlooks materialize.
The governor also expressed vigilance over the potential impact of changing tariff policies worldwide and mentioned that the BoJ will review bond taper plans at the next policy meeting, considering feedback from bond market participants.
Minutes from recent BoJ meetings revealed limited appetite among investors for adjustments to the current bond tapering strategy. While opinions varied on the pace of tapering beyond April 2026, most agreed on maintaining a balance between flexibility and predictability.
From a market perspective, moves in short- and medium-term Japanese Government Bond (JGB) yields have greater economic impact than super-long yields, though volatility in the latter could indirectly influence the broader yield curve.
Following Ueda’s remarks, the USD/JPY pair edged up 0.10% to trade around 142.85.
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