TOKYO, Jan 5 (Reuters) – Bank of Japan Governor Kazuo Ueda said on Monday the central bank will continue raising interest rates if economic and price developments move “in line with its forecasts.”
Japan’s economy maintained a moderate recovery last year despite the impact of higher U.S. tariffs on corporate profits, Ueda said in a speech to the country’s banking lobby.
“Wages and prices are very likely to rise together moderately,” Ueda said, adding that adjusting the degree of monetary support will help the economy achieve sustained growth.
The BOJ raised its policy rate to a 30-year high of 0.75% from 0.5% last month, taking another historic step to end decades of huge monetary support and near-zero borrowing costs.
Despite the move, Japan’s real borrowing costs remain deeply negative and consumer inflation has exceeded the BOJ’s 2% target for almost four years.
Markets are focusing on the BOJ’s quarterly outlook report at its Jan. 22-23 policy meeting, looking for clues on how the board sees the inflationary impact of the yen’s recent declines.
The yen’s weakness has raised import costs and increased inflation, leading some board members to call for more steady rate increases.
The dollar rose 0.2% to 157.08 yen on Monday after reaching 157.255 for the first time since December 22. Market expectations of further BOJ rate hikes have pushed yields higher, with those on the benchmark 10-year Japanese government bond (JGB) briefly hitting a 27-year high of 2.125% on Monday.
Speaking to the same banking lobby, Finance Minister Satsuki Katayama said Japan was in a critical stage of transition to a growth-driven economy from an economy mired in deflation.
(Reporting by Leika Kihara; Editing by Christopher Cushing and Sam Holmes)