## Bank of Japan Governor Ueda Discusses Inflation and Interest Rates
In an interview with The Asahi Shimbun, Bank of Japan Governor Kazuo Ueda emphasized the need for greater certainty about achieving the 2% inflation target before considering an interest rate hike. He acknowledged that the recent wage hikes from the "shunto" spring labor offensive could contribute to higher consumer prices in the coming months, increasing the likelihood of achieving the target.
Ueda explained that the BOJ's decision to end its negative interest rate policy in March was based on a higher degree of certainty in achieving the inflation target. He compared this certainty to a percentage, stating that a 75% certainty level justified ending the negative interest rate policy, and a further increase to 80-85% could warrant an actual interest rate hike.
The governor acknowledged that the current underlying inflation rate of 2% has not yet been achieved due to higher import costs. However, he expressed optimism that the wage hikes and a potential decline in the rate of consumer price increases, coupled with the government's planned income tax cut, could boost personal consumption and contribute to achieving the target.
Ueda also highlighted the importance of maintaining a loose monetary environment as long as the underlying inflation rate remains below 2%. He acknowledged that an excessively weak yen could impact the economy and consumer prices, potentially influencing the decision on raising interest rates.
While acknowledging that inflation exceeding 2% could be a factor for raising interest rates, Ueda downplayed the likelihood of this scenario. He also reaffirmed the BOJ's commitment to the joint statement with the government to achieve a 2% inflation rate in a stable and sustainable manner.