BOJ Seeks More Rate Hikes but Not in Rush, Deputy Governor Says -- 2nd Update

The Bank of Japan (BOJ) is not in a hurry to raise interest rates further, despite expectations of more hikes in the near future. BOJ Deputy Governor Shinichi Uchida stated that the central bank will pursue more rate increases gradually, while maintaining accommodative financial conditions to ensure stability in economic activity and prices in the long run. Uchida emphasized that the BOJ will debate policy decisions at each meeting, looking at economic and price developments, and will not raise rates at every meeting.

Uchida highlighted that underlying inflation is still below the BOJ's target of 2%, and tightening monetary policy in this situation could suppress economic activity and hinder wage growth. He expects underlying inflation to reach around 2% between October 2025 and March 2027, helped by wage growth. The BOJ deputy governor noted that wage growth is key to gauging Japan's trend inflation, and the central bank will be vigilant to how price moves for goods people buy frequently affect inflation expectations.

Market reaction to Uchida's comments was muted, with USD/JPY holding minor gains near 149.80. Investors seem to be taking a wait-and-see approach, awaiting further clarity on the BOJ's policy direction. The BOJ's next policy meeting is scheduled for March 18-19, where the central bank is expected to hold policy steady, following the rate hike in late January.

In conclusion, the BOJ is not rushing to raise interest rates further, despite expectations of more hikes. The central bank is committed to a gradual approach, balancing the need for further rate increases with the potential impact on economic activity and wage growth. The BOJ will continue to monitor economic and price developments, as well as global economic conditions, to determine the appropriate timing for future rate hikes.