Bank of Japan Governor Kazuo Ueda said Monday the central bank will keep raising interest rates if economic and price trends follow its forecasts. He emphasized that moderate, synchronized increases in wages and prices are “highly likely” and essential for stable growth.
Ueda made the remarks in a speech to Japan’s banking sector lobby. He noted the economy maintained a moderate recovery in 2025, even as higher U.S. tariffs pressured corporate profits. “Adjusting the degree of monetary support will help the economy achieve sustained growth,” he added.
Last month, the BOJ lifted its policy rate to 0.75%—a 30-year high—marking another major step away from decades of ultra-loose policy. Still, real borrowing costs remain deeply negative because consumer inflation has stayed above the BOJ’s 2% target for nearly four years.
Markets are now watching the BOJ’s quarterly outlook report, due January 22–23, for signals on future moves. In particular, investors want to know how policymakers view inflation driven by the yen’s decline. The weaker currency has raised import costs and broadened price pressures, prompting some board members to back steady Bank of Japan rate hikes.
On Monday, the dollar rose 0.2% to 157.08 yen, nearing its December high of 157.255. Expectations of tighter policy pushed 10-year Japanese government bond yields to a 27-year peak of 2.125%.
Finance Minister Satsuki Katayama echoed Ueda’s outlook in a separate address to the same banking group. She described Japan as being at a “critical stage” in shifting from a deflationary mindset to a growth-driven economy.
Together, their comments suggest a coordinated push toward normalizing monetary conditions. However, the BOJ remains cautious. It will likely raise rates only gradually—contingent on continued wage growth, stable demand, and evidence that inflation is self-sustaining.
For now, the era of near-zero rates is clearly over. And if current trends hold, more Bank of Japan rate hikes could follow in 2026.
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