Ueda Says BOJ Will Proceed Cautiously with Inflation Targeting Frameworks

REUTERS/Kim Kyung-Hoon/File Phot
Bank of Japan Governor Kazuo Ueda attends a press conference after a policy meeting at BOJ headquarters, in Tokyo, Japan March 19, 2024.

TOKYO (Reuters) – The Bank of Japan (BOJ) will proceed cautiously with inflation-targeting frameworks, Governor Kazuo Ueda said on Monday, noting that some challenges are “uniquely difficult” for Japan after years of ultra-easy monetary policy.

In an opening speech to a BOJ-hosted seminar in Tokyo on central banking, Ueda said Japan has “made progress in moving away from zero and lifting inflation expectations.”

To achieve 2% inflation in a sustainable and stable manner, the BOJ “will proceed cautiously, as do other central banks with inflation-targeting frameworks,” he said.

“While many of the challenges we face are similar to those encountered by our counterparts, some are uniquely difficult for us,” the BOJ chief added.

Ueda noted that estimating the neutral interest rate accurately is particularly challenging in Japan, given the prolonged period of near-zero short-term interest rates over the past three decades.

“The absence of significant interest rate movements poses a considerable obstacle in assessing the economy’s response to changes in interest rates,” he said.

In a landmark move in March, the BOJ ended eight years of negative interest rates and other remnants of its radical stimulus as it judged that sustained achievement of its 2% inflation target was in sight.

Ueda has said the central bank intends to hike rates to levels considered neutral for the economy, as long as growth and inflation move in line with its projections.