FX.co ★ BoJ Open to More Tightening If Outlook Holds: Governor Ueda

In a speech delivered on Monday, Bank of Japan Governor Kazuo Ueda stated that the central bank is prepared to continue increasing interest rates, provided that economic and inflationary conditions align with their forecasts. Despite facing declining corporate profits due to heightened U.S. tariffs, Japan's economy demonstrated a moderate recovery last year. Ueda highlighted the likelihood of simultaneous, moderate increases in wages and prices, emphasizing that adjusting monetary policy will foster sustainable growth. In December, the BoJ raised its policy rate by 25 basis points to 0.75%, reaching its highest level in 30 years and moving further away from a prolonged period of near-zero interest rates. Nevertheless, real borrowing costs persist in negative territory as consumer inflation has remained above the 2% target for nearly four years. Investors are now focused on the upcoming board’s quarterly outlook report, scheduled for the January 22-23 meeting, for insights into policymakers’ perspectives on the inflationary impact resulting from the yen's recent depreciation.