BOJ Governor Ueda’s Remarks at News Conference – Reuters

(Reuters) – The Bank of Japan maintained its current interest rates on Friday, while also adjusting its assessment of consumption upward, indicating confidence in a robust economic recovery that may lead to future rate increases.

As anticipated, the BOJ decided to keep short-term interest rates at 0.25% following a two-day policy meeting.

Below are key statements from BOJ Governor Kazuo Ueda during a post-meeting press conference, translated from Japanese:

INTEREST RATES
"Our monetary policy decisions will be influenced by developments in the economy, prices, and financial markets at the time. Current real interest rates in Japan remain exceedingly low. Should our projections for the economy and prices materialize, we will raise interest rates and adjust our monetary support accordingly."

ECONOMIC OUTLOOK
"The global economic outlook remains highly uncertain, and market volatility persists. We must carefully monitor these developments in the near term."

PRICE TARGET
"We will closely assess how these risks impact our forecasts and the likelihood of achieving our price target."

EXCHANGE RATE
"Regarding recent fluctuations in exchange rates, the risk of inflation overshooting due to rising import prices has significantly decreased. Consequently, we have some time to consider our policies."

NOMINAL WAGES
"Wages must increase consistently to sustainably reach our price target. We are witnessing rises in nominal wages, driven by positive outcomes in wage negotiations and increased bonuses. We expect this upward trend in wages to continue."

MARKET STABILITY
"It is difficult to predict how long it will take to ascertain whether markets have stabilized, and we do not have a specific deadline. We are particularly interested in whether the U.S. economy can achieve a soft landing or if the slowdown might be more severe."

WAGE NEGOTIATIONS
"We are optimistic about strong outcomes in next year’s wage negotiations, but we need to carefully monitor how global economic conditions could impact corporate activities and profits."

BROAD WAGE HIKES
"Wage increases are becoming more widespread, though some smaller enterprises are facing challenges. We will need to carefully observe whether these wage hikes can continue to expand."

JAPAN’S ECONOMY
"Based on consumption and other relevant data, Japan’s economy is aligning with our forecasts. We could have even upgraded our inflation expectations based on domestic data. However, increased uncertainty regarding the U.S. economic outlook tempers some of our optimism."

NEUTRAL INTEREST RATE
"We have yet to narrow down the estimated level of Japan’s neutral rate and must deepen our analysis regarding the effects of two rate hikes this year."

BOTTOM RANGE OF NEUTRAL RATES
"We do not have a precise figure for the lower boundary of Japan’s neutral rate. Approaching that level does not mean we will automatically proceed slowly; rather, we will be cautious about the implications of our previous rate increases."

AUGUST INFLATION
"In August, inflation readings were slightly stronger than expected, partly due to the weak yen effect. Along with other temporary factors, many of these influences will fade. However, service prices are rising in line with our projections, driven by increasing wages, which is putting upward pressure on inflation. We must comprehensively consider all these factors, including global uncertainties and market fluctuations."

KEY FACTORS TO MONITOR
"Key aspects for us to monitor in our policy decisions include the stability of wage increases, impacts from anticipated minimum wage rises, and whether businesses will continue to transfer rising labor costs to service prices. The results of next year’s wage negotiations, along with firm consumption, are crucial."

POTENTIAL RISKS FROM RATE HIKES
"Different countries set monetary policy to achieve their own economic and price stability objectives, leading to potential differences in the timing of monetary policy cycles. If the U.S. enters a rate-cutting phase and manages a soft landing, the adverse effects on Japan may be minimal. However, should the U.S. experience a more pronounced downturn, we may need to reassess our expectations."

FUTURE RATE HIKES
"I cannot comment in advance on future decisions regarding policy changes."

U.S. SOFT LANDING SCENARIO
"We continue to view a soft landing for the U.S. as our primary scenario, although some recent U.S. data since early August has shown weakness, which raises concerns."

UNCERTAINTY IN GLOBAL ECONOMIC OUTLOOK
"While Japan’s economy is progressing in accordance with our projections, the uncertainty surrounding the global economic outlook—mainly that of the U.S.—is noteworthy. Market fluctuations further contribute to this uncertainty. Therefore, the likelihood of achieving our price target has not increased sufficiently to warrant an immediate rate hike."

YEAR-END RATE INCREASE
"Any decision regarding a rate increase by the end of the year remains contingent on data availability. We need to evaluate both domestic indicators and U.S. economic developments, which we are currently scrutinizing, to arrive at a comprehensive decision."