The Bank of Japan opted to leave interest rates unchanged to assess broader financial conditions as well as ongoing economic and price risks. Kazuo Ueda emphasized that central bankers will not simply sit and wait while price pressures develop, even though upside inflation risks have not surged compared to the previous month. Moving forward, the institution intends to adjust monetary policy as necessary to ensure medium- and long-term inflation expectations remain solidly anchored around the target.
Key points
Policymakers are shifting into a hawkish phase to maintain underlying inflation near the…: Policymakers are shifting into a hawkish phase to maintain underlying inflation near the targeted level.
The central bank will scrutinize price mechanisms rather than passively waiting for susta…: The central bank will scrutinize price mechanisms rather than passively waiting for sustained economic trends to unfold.
Future rate increases will depend on how effectively medium- and long-term inflation expe…: Future rate increases will depend on how effectively medium- and long-term inflation expectations remain anchored.
Sources checked by our analysis pipeline: 1
Oct 30 : The Bank of Japan kept interest rates steady on Friday, but declared victory in a nearly 14-year battle to hit its price target and signalled vigilance against inflation risks, suggesting the next rate hike could be as soon as December.
With underlying inflation roughly hitting the BOJ's 2 per cent target, the central bank must focus on anchoring it around that level, it said, stressing anew that its policy has entered a new, more hawkish phase open to raising rates once every few months.
Following are excerpts from Governor Kazuo Ueda's comments at his post-meeting news conference, which was conducted in Japanese, as translated by Reuters:
ON KEEPING RATES STEADY:
"We saw the need to scrutinise a bit more economic and price risks, as well as financial conditions. But underlying inflation has reached levels consistent with our price target. Financial conditions remain accommodative. There are various upside risks. We must therefore be vigilant to the risk of inflation overshooting our target."
UNDERLYING INFLATION:
"We will look at various indicators but more importantly, what kind of mechanism is…
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