FX.co ★ BoJ Signals Rate Hike Readiness Amid Inflation Risks

Bank of Japan (BoJ) Governor Kazuo Ueda reiterated that the central bank is poised to raise interest rates if underlying inflation trends towards the 2% target. Despite core consumer inflation staying consistently above 2% over the past three years, demand-driven inflationary pressures remain muted. In a statement to parliament, Ueda emphasized that the BoJ is currently maintaining negative real interest rates to foster stable and sustained inflation. "We will proceed with raising rates once we have greater assurance that underlying inflation is approaching or stabilizing around 2%," he stated. Last year, the BoJ concluded its decade-long stimulus strategy, adjusting short-term rates to 0.5% in January as inflation drew closer to their target. However, increased U.S. tariffs and global economic uncertainties have led to revised down growth forecasts, complicating the trajectory for further rate increases. Ueda also highlighted the potential risk of reaching the zero lower bound, which could impair the BoJ’s capacity to counter future economic downturns. The bank's next monetary policy meeting is scheduled for June 16-17.