Summary
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BOJ’s Ueda signalled readiness to continue raising rates
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Further tightening depends on growth and inflation tracking forecasts
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Wage–price cycle seen as increasingly sustainable
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Monetary adjustment framed as supportive of long-term growth
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Signals reinforce Japan’s exit from deflation-era policy
Bank of Japan Governor Kazuo Ueda reinforced expectations of further policy normalisation, signalling that the central bank is prepared to continue raising interest rates provided economic and inflation conditions evolve broadly in line with its forecasts. His comments underline growing confidence within the BOJ that Japan is finally exiting its long deflationary era and transitioning toward a more durable, growth-driven model.
Ueda said the BOJ expects to keep adjusting the degree of monetary support as the outlook for growth and prices improves. He stressed that gradual reductions in accommodation would help entrench sustainable economic expansion, rather than undermine it — a clear rebuttal to lingering concerns that tightening could choke off momentum.
Crucially, Ueda said he expects Japan’s economy to maintain a virtuous cycle in which wages and prices rise moderately together. This wage–price dynamic has long been the BOJ’s missing link, and Ueda’s confidence suggests policymakers believe recent wage gains are no longer transitory but increasingly structural. Labour market tightness, demographic constraints and shifting corporate behaviour are now seen as reinforcing forces behind steady wage growth.
The remarks align with comments earlier in the session from Finance Minister Taro Katayama, who described Japan as being at a “critical stage” in its shift away from deflation toward a growth-led economy. While Katayama focused on the broader economic transition, Ueda’s comments provided the clearest signal yet that monetary policy will continue to move in a less accommodative direction if conditions allow.
Markets have been watching closely for confirmation that the BOJ’s December move marked the start of a sustained normalisation cycle rather than a one-off adjustment. Ueda’s language strongly suggests the former. By explicitly linking future rate hikes to forecast-consistent growth and inflation outcomes, the governor reaffirmed the BOJ’s data-dependent but forward-leaning stance.
Taken together, the comments reinforce expectations that Japan’s ultra-loose monetary era is drawing to a close. While Ueda continues to emphasise gradualism and caution, his confidence in the wage–price cycle indicates the threshold for further tightening is lower than in previous years. For markets, the message is clear: as long as the economy behaves as the BOJ expects, policy rates are likely to keep moving higher, albeit at a measured pace.
This article was written by Eamonn Sheridan at investinglive.com.