In an interview with The Asahi Shimbun newspaper, BoJ Governor Kazuo Ueda highlighted extended Yen weakness could prompt further rate hikes by the central bank.
“If exchange rate trends have an effect on the cycle between wages and prices that cannot be ignored, that would become a reason for responding to the situation through monetary policy,” he explained.
Ueda also outlined other conditions under which BoJ might consider additional rate hikes, after the landmark shift in March which exited negative interest rates.
The decision to end negative interest rates was made with a certain level of confidence, quantified by Ueda as “75 percent.” He indicated that an increase in this confidence level to “80 percent or 85 percent” could prompt further adjustments
Governor also touched on factors likely to boost personal consumption, including the government’s planned income tax cut in June, expected wage increases, and a slowdown in consumer price inflation. These developments, if they materialize as anticipated, could pave the way for a higher interest rate as early as between summer to autumn.
Moreover, Ueda acknowledged the impact of a “excessively weak yen” on Japan’s economy and consumer prices, suggesting that significant currency weakness could influence future decisions regarding interest rate hikes.
