Bank of Japan Chief Vows to Closely Monitor Unstable Markets; Gov. Kazuo Ueda Has Positive Stance on Future Interest Rate Hikes

The Yomiuri Shimbun

15:38 JST, August 23, 2024

Bank of Japan Gov. Kazuo Ueda said during Diet deliberations on Friday that the central bank will closely monitor the ongoing volatility in the financial markets “with extreme caution.”

Ueda made the remarks during deliberations of the House of Representatives’ Committee on Financial Affairs, which were held while the Diet is out of session. He attended the deliberations to explain the BOJ’s response to the volatility in the stock and currency markets in early August after the central bank decided to raise its key interest rate from the 0.0%-0.1% range to around 0.25% during a monetary policy meeting on July 31.

At a press conference later the same day, Ueda expressed a positive stance about future rate hikes.

Following the policy meeting, fears over a recession in the U.S. economy intensified, while the Nikkei Stock Average experienced it largest-ever daily decline before largely recovering to mark its biggest gain the following day. The yen briefly strengthened to the ¥141 range against the dollar.

During the deliberations, Norihiro Nakayama of the Liberal Democratic Party asked for Ueda’s views regarding the reasons behind the sharp decline in stock prices and the recent market turmoil.

In response, Ueda acknowledged that the additional rate hike had affected the yen trade, saying, “The [BOJ] policy change at the end of July led moves to correct the yen’s one-sided and ongoing depreciation.”

Meanwhile, Hiromasa Nakagawa of the LDP’s junior coalition partner Komeito said, “Some people have pointed to [BOJ’s] insufficient dialogue with the markets.”

In response, Ueda expressed the bank’s intention to “continue to manage monetary policy appropriately while carefully communicating with the markets.”

Regarding future policy operations, Ueda said: “Our basic stance remains unchanged. We will adjust the degree of monetary easing while monitoring the impact of market movements on the economy and prices.”

Ueda reiterated the BOJ’s stance to raise interest rates again if it would increase the probability of realizing the bank’s target 2% inflation rate.