(Reuters) -The Bank of Japan raised interest rates on Friday to their highest since the 2008 global financial crisis and revised up its inflation forecasts, underscoring its confidence that rising wages will keep inflation stable around its 2% target.
At its two-day meeting concluding on Friday, the BOJ raised its short-term policy rate from 0.25% to 0.5% – a level Japan has not seen in 17 years. It was made in an 8-1 vote with board member Toyoaki Nakamura dissenting.
Following are excerpts from BOJ Governor Kazuo Ueda’s comments at his post-meeting news conference, which was conducted in Japanese, as translated by Reuters:
WAGE HIKE
“Many firms are saying they will continue to raise wages … Various data shows the U.S. economy is in firm shape. Markets have been stable as the broad direction of Trump’s policies become clearer. While import price growth is subdued on a year-on-year basis, the weak yen is pushing up import costs.”
POLICY RATE
“There’s no change to our view of raising our policy rate and adjusting the degree of monetary support if the economy and prices move in line with our forecasts.
“The timing and pace of adjusting monetary support will depend on economic and price developments at the time. We don’t have any preset idea. We will make a decision at each policy meeting by looking at economic and price developments as well as risks.”
SHARP UPGRADE IN INFLATION FORECASTS
“The rise in underlying inflation is moderate. I don’t think we are seriously behind the curve in dealing with inflation.”
IMPACT OF TRUMP’S TARIFF POLICIES
“There’s very high uncertainty on the scale of tariffs. Once there is more clarity, we will take that into our forecasts and reflect them in deciding policy.
“It’s necessary to raise interest rates in accordance with developments in the economy and prices. We also need to see how our rate hikes affect the economy. It’s therefore appropriate to gradually raise interest rates in several stages, while carefully examining the impact of our moves.”
TERMINAL RATE
“There’s no change to our view on the neutral rate, which in our estimate is spread in a wide band. The estimated band hasn’t changed much. In terms of the distance to the neutral rate, it’s true it has shortened after raising rates to 0.5%. But there’s still quite some distance.”
(Reporting by Leika Kihara; Editing by Subhranshu Sahu)
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