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(Bloomberg) -- Bank of Japan Governor Kazuo Ueda sent a fresh reminder to bankers that he’s going to raise the benchmark rate if the economy continues to improve this year.
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“Our stance is that we will raise the policy interest rate to adjust the degree of monetary easing if economic and price conditions keep improving,” Ueda said Monday in his first public speech of 2025. The governor spoke briefly at a new-year conference held by the Japanese Bankers Association in Tokyo.
Ueda’s reiteration of his existing stance comes as BOJ watchers seek clues over whether the central bank will raise rates this month or in March. The governor kept his options open on the timing of the next rate hike by saying it will depend on the economy, inflation and financial conditions.
After holding the benchmark rate at 0.25% last month, Ueda boosted market speculation that a rate hike may not take place in January, by giving dovish comments during his afternoon press conference. That helped send the yen to its lowest level against the dollar since July, as most market watchers previously expected the next hike to come by January.
Since then, the summary of opinions for the December gathering hinted that some board members see a need to increase borrowing costs sooner rather than later. Ueda’s comments Monday underscore that the central bank may be moving rates this month, while they could still choose to wait it out depending on circumstances. That uncertainty has kept the yen at a relatively weak level.
The yen held its losses after Ueda spoke, following its drop of as much as 0.4% to 157.83 against the dollar on Monday morning. Japan’s five-year government bond yield climbed to its highest since 2009 and the 10-year yield rose to its peak since 2011 amid elevated US long-term yields and speculation that the BOJ will hike interest rates in the near future.
The BOJ ended its massive monetary stimulus program including the world’s last negative interest rate in March last year. The central bank’s normalization efforts have helped Japanese banks’ profit margins, buoying their stocks higher. At the same time, any rapid hikes could hurt banks by increasing costs before they can adjust their portfolios.
The central bank is set to hold its next policy meeting between Jan. 23-24. There is no scheduled public speech by Ueda before then, although Deputy Governor Ryozo Himino is set to give a speech and press conference on Jan. 14. That event is expected to draw close market attention for any further clues over a January rate hike.