Bank of Japan Governor Reiterates Risk of Inflation Overshoot and Emphasizes Importance of Anchoring the 2% Target

According to Golden Ten Data APP, Bank of Japan Governor Kazuo Ueda reiterated on Friday that there is a risk of core inflation exceeding the central bank's 2% target and emphasized the importance of anchoring price pressures around that target. His remarks come ahead of the Bank of Japan's policy meeting at the end of October, as the market closely watches for clues about the timing of the next rate hike.

In a speech read by Deputy Governor Shinichi Uchida at the Japanese Credit Union meeting, Kazuo Ueda stated that factors such as tensions in the Middle East, demand related to artificial intelligence, and exchange rate fluctuations could impact Japan's economy and prices, posing a risk that core inflation may surpass the central bank's target.

"Anchoring core inflation around 2% is more important than ever," Kazuo Ueda said, emphasizing the need to ensure that any overshooting does not harm the economy.

These remarks are consistent with Kazuo Ueda's comments earlier this month. The Bank of Japan will hold its policy meeting on October 29 and 30, during which it will release new quarterly growth and inflation forecasts. Market participants will scrutinize these forecasts to look for clues about the timing of the next rate hike.

Last month, the Bank of Japan raised key interest rates to a 31-year high, stating that it has entered the phase of preventing core inflation from exceeding the target level, which increases the possibility of policy tightening.

Currently, the market widely expects the Bank of Japan to stay put in October, with the December monetary policy meeting seen as the next key window for a rate hike.