MNI BRIEF: BOJ Ueda's Signals Policy Hike Delay

Bank of Japan Governor Kazuo Ueda on Thursday signaled a potential delay in raising the 0.5% policy interest rate, citing a likely temporary pause in the improvement of underlying inflation, following the board's decision to hold on Thursday.

“Economic growth will likely be under downward pressure due to the U.S. trade policies," Ueda told reporters. "As a result, the rise in wages and prices is somewhat weaker and the improvement of underlying CPI inflation is likely to stall." 

While the BOJ has pushed back its expected timing for achieving the 2% inflation target compared to three months ago, Ueda reaffirmed that the goal remains within reach over the projection period.

Asked about the timing of the next rate hike, the governor said it will depend on whether economic and price trends align with the bank’s baseline scenario and how likely that scenario is to materialise. Shifting global trade policies could alter the outlook, he noted.

Despite the uncertainty, Ueda reiterated that the BOJ still intends to gradually raise the policy rate to adjust the level of monetary easing, provided the economy and inflation evolve in line with forecasts. (See MNI POLICY: BOJ Growth Cut Will Not Close Door on Hikes)