In This Article:
(Bloomberg) -- Bank of Japan Governor Kazuo Ueda avoided giving a clear signal that he might raise interest rates next month by reiterating the need to keep monitoring risks for the economy in comments that nudged down the yen.
Most Read from Bloomberg
-
Ho Chi Minh City Opens First Metro Line After Years of Delay
-
New York’s Congestion Pricing Plan Still Faces Legal Hurdles
-
Mexico City to Boost Mobility, Security Ahead of FIFA World Cup
“The timing and pace of adjusting the degree of monetary accommodation will depend on developments in economic activity and prices as well as financial conditions going forward,” Ueda said in a speech at a business conference in Tokyo on Wednesday.
“The bank needs to pay due attention to various risk factors at home and abroad, and to examine how these factors will affect the outlook and risks for Japan’s economic activity and prices and the likelihood of realizing the outlook,” he said.
The speech comes after Ueda indicated last week that the BOJ may wait longer before raising rates, a view that surprised investors expecting a January move if the bank didn’t act at its December meeting. The policy stance of President-elect Donald Trump was among the uncertain factors cited by Ueda at the time. The governor’s unexpected dovishness triggered a slide in the yen and warnings from Japan’s finance ministry about one-sided and speculative currency movements.
Ueda on Wednesday continued in that vein. He appeared to want to keep his options open by noting the need to keep rates low to support the economy while at the same time flagging the risk of maintaining rates at low levels for too long.
“Governor Ueda is keeping his hands free as there are lots of uncertainties including the yen and Trump,” said Masato Koike, senior economist at Sompo Institute Plus. “Today’s speech keeps open the chance of a January rate hike but the likelihood of a March move is probably higher. It’s just too early to commit to a hike or no hike in January.”
The yen weakened to as much as 157.37 against the dollar following his comments in Tokyo from around 157.13 at the start of his speech. The move suggested a further recalibration toward a later rate hike among market participants.
Still, the speed of the weakening suggested little immediate chance of the yen breaking the five-month low of 157.93 touched last week, or the kind of slide that might trigger further currency intervention by Japan.
As Japan transitions toward achieving stable 2% inflation, the BOJ will maintain easy financial conditions by keeping the rate lower than the neutral level to firmly support the economy, Ueda said. “We have to make sure that Japan’s economy will not return to a deflationary or low-inflation environment,” he said.