Kazuo Ueda's first speech on “releasing an eagle” in the new year: the Bank of Japan's interest rate hike process will continue to advance

The Zhitong Finance App learned that Bank of Japan Governor Ueda Kazuo delivered a speech to private bankers during his first public appearance in the new year, highlighting the policy intention to continue raising the benchmark interest rate.

“We will continue to advance the interest rate hike process based on economic recovery and inflation trends,” Kazuo Ueda said at the New Year's conference hosted by the Japan Bankers Association on Monday. “Adjusting monetary easing policies in a timely manner will help achieve stable inflation targets and promote long-term economic growth.”

This statement came about two weeks after the most recent rate hike, clearly showing that after raising interest rates to the highest level since 1995, Kazuo Ueda did not stop withdrawing from the monetary easing policy. Shortly before his speech, Japan's 10-year treasury bond yield continued its recent upward trend and climbed to a high point since 1999. This is partly due to market expectations for further interest rate hikes by the central bank.

Kazuo Ueda stated, “The virtuous cycle mechanism between moderate wage growth and inflation is expected to be maintained.”

According to information, the Bank of Japan raised the benchmark interest rate to 0.75% on December 19 last year. Most observers expect the central bank's next action to be around the middle of this year, but some analysts suggest that due to the weakening yen, the risk that interest rate hikes may be early is rising. As of press release, the yen traded around 157.18 against the US dollar, having previously hit 157.25, the lowest level in two weeks.

After Kazuo Ueda's speech, there was limited fluctuation in the yen exchange rate. Market participants believe that the exchange rate of the yen is approaching the critical threshold of 160 against the US dollar, which is an important factor affecting the Bank of Japan's interest rate decision last month.

The weak yen increased inflationary pressure by driving up import costs. As Japan's core inflation index has been at or above the central bank's target level of 2% for more than three and a half years, households are already under pressure that the cost of living continues to rise.

The Bank of Japan will announce its next policy decision on January 23.