BOJ Governor Ueda Signals More Rate Hikes Ahead, Boosting Yen

Bank of Japan Governor Kazuo Ueda indicated that the central bank may raise interest rates further if the economy improves, boosting the yen. Ueda stated that the BOJ will adjust its monetary policy as needed to achieve its sustainable price goal. He also acknowledged growing uncertainties, including Trump's tariff policies, but expressed confidence that underlying inflation will move toward 2% over the second half of the forecast horizon.

Bank of Japan Governor Kazuo Ueda has indicated that the central bank may raise interest rates further if the economy improves, which could boost the yen. In a recent statement, Ueda emphasized that the BOJ will adjust its monetary policy as needed to achieve its sustainable price goal of 2% inflation. He also acknowledged growing uncertainties, including potential impacts from trade policies, but expressed confidence that underlying inflation will move toward 2% over the second half of the forecast horizon [3].

Ueda's remarks come at a time when the Bank of Japan is working to fine-tune its quantitative tightening process. Market participants are divided on whether to accelerate or slow down bond purchases, with some arguing that the central bank should reduce its holdings more aggressively to address the distorted yield curve. Others, however, are concerned that rapid tightening could exacerbate market liquidity issues [1].

The Bank of Japan's decisions significantly influence the Japanese yen. The central bank's massive stimulus caused the yen to depreciate against its main currency peers, a trend that has partly reversed as the BOJ has begun to unwind its ultra-loose monetary policy stance. The recent interest rate hikes have led to a strengthening of the yen, which could continue if the BOJ raises rates further [3].

Ueda's statement highlights the Bank of Japan's cautious approach to monetary policy. The central bank is closely monitoring economic indicators and is prepared to adjust its policy as needed to achieve its inflation target. However, the governor also acknowledged the challenges posed by external factors, such as trade policies, which could impact the Japanese economy and influence the central bank's decisions [3].

In summary, Bank of Japan Governor Kazuo Ueda's recent statement indicates that the central bank may raise interest rates further if the economy improves, which could boost the yen. The BOJ's cautious approach to monetary policy reflects its commitment to achieving sustainable price stability while navigating growing uncertainties.

References:
[1] https://longportapp.com/en/news/240998791
[2] https://www.tradingview.com/news/reuters.com,2025:newsml_L8N3RT0NL:0-ghana-s-central-bank-to-assess-interest-rate-impact-on-inflation-says-governor/
[3] https://www.fxstreet.com/news/bojs-ueda-close-to-inflation-target-but-not-quite-there-202505270023