## Bank of Japan Governor Ueda Discusses Interest Rate Policy
In an interview with The Asahi Shimbun on April 3, Bank of Japan Governor Kazuo Ueda addressed the possibility of raising interest rates. He emphasized the need for greater certainty in achieving the 2% inflation target before any such decision is made.
Ueda acknowledged the recent wage hikes resulting from the "shunto" spring labor offensive as a positive step towards achieving the inflation target. He expects these wage increases to translate into higher consumer prices in the coming months, further bolstering the likelihood of reaching the target.
However, Ueda cautioned that the current inflation rate of 2% is largely driven by rising import costs rather than a genuine increase in underlying inflation. He stressed the need for a sustained inflation rate of 2% before considering an interest rate hike.
Ueda also highlighted the importance of personal consumption in driving economic growth. He anticipates that the upcoming income tax cut, coupled with higher wages and a potential slowdown in inflation, will boost consumer spending.
Despite these positive indicators, Ueda emphasized the need for a continued loose monetary policy as long as the underlying inflation rate remains below 2%. He also acknowledged the potential impact of a weak yen on the economy and consumer prices, suggesting that excessive depreciation could trigger a policy response.
Regarding the possibility of inflation exceeding 2%, Ueda acknowledged it as a factor for raising interest rates but downplayed its likelihood. He also reaffirmed the BOJ's commitment to the joint statement with the government to achieve a stable and sustainable 2% inflation rate.
In conclusion, Ueda's interview suggests a cautious approach to raising interest rates. He emphasizes the need for greater certainty in achieving the inflation target and highlights the importance of monitoring factors such as personal consumption, exchange rate fluctuations, and underlying inflation.