BOJ lifts rates to 31-year high, Ueda warns of cautious future hikes

The Bank of Japan announced a rate hike that pushes its policy rate to a 31-year high, aligning with global central banks confronting inflation fueled by rising oil costs. Governor Kazuo Ueda explained that the move did not stabilize the yen, as investors focused on the lack of explicit hawkish guidance and the presence of two dovish dissenters. He stressed that the pace of any additional hikes will be data-driven, with no preset schedule such as quarterly increases.

Ueda warned that persistent energy price rises could add pressure to both wholesale and consumer inflation, and cautioned against tightening financial conditions too sharply, which might trigger abrupt asset-price adjustments. He noted the difficulty in pinpointing the neutral and terminal rates, suggesting they will become clearer as policy evolves. The central bank’s stance reflects a shift from pushing underlying inflation up from below 2 % to stabilising it at that target.