MNI BRIEF: BOJ's Ueda Sees Small Behind-The-Curve Risk

The risk of the Bank of Japan falling behind the curve is limited, even as consumer prices remain elevated, Governor Kazuo Ueda told reporters in Osaka Friday. 

“We see as the baseline scenario that the drop in food prices caused by supply factors will continue. But if the pace of slowing food prices is more moderate, it could boost inflation expectations. We cannot rule out the risk, but the possibility isn’t high,” Ueda said.

When asked which risks the BOJ is more concerned about – upside pressures to prices or downside risks to the economy – Ueda said, “Finally, the bank is focused on how economic developments affect the path of prices.”

Regarding the policy decision at the October meeting, Ueda noted the BOJ will base its decision on the latest economic data and information available at the time. (See MNI POLICY: BOJ's Tankan Raises Hike Odds, Ueda Speech Eyed) Some U.S. economic data could be delayed due to a potential government shutdown, he added.

Aside from the labour market, the U.S. economy remains solid, and there is a possibility that growth could be stronger than expected, he continued. On the topic of wage hikes for fiscal 2026, he said they will depend on how the U.S. economy evolves.

He also commented on trade policy, noting that while uncertainty over the impact of trade measures on the U.S. and global economies remains significant, the level of uncertainty has declined somewhat thanks to existing trade deals.