MNI BRIEF: BOJ Ueda Says Gradual Rate Hike Path Intact

Developments in trade policies since early spring have affected Japan's economy more than expected, but "nascent developments" toward achieving the 2% price stability target continue to gain momentum, Bank of Japan Governor Kazuo Ueda said on Tuesday in a speech.

“If Japan's underlying CPI inflation increases toward 2%, in line with the baseline scenario of the outlook, the Bank, in accordance with improvement in economic activity and prices, will continue to raise the policy interest rate and adjust the degree of monetary accommodation.”

But complex global supply chains have added to uncertainties surrounding tariffs, which could also impact Japanese firms' wage- and price-setting, while questions hang over the future of globalisation, he said.

The BOJ will conduct an interim assessment of plans for tapering bond purchases, though Ueda noted that reduced purchases has improved market functioning. Many market participants agree the Bank should continue to reduce purchases from April 2026, Ueda said.

“Tt continues to be important to strike a balance between predictability and flexibility.”