## Bank of Japan Governor Ueda Discusses Inflation and Interest Rates
In an interview with The Asahi Shimbun on April 3, Bank of Japan Governor Kazuo Ueda addressed the issue 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 that wage hikes from the recent "shunto" spring labor offensive could contribute to higher consumer prices in the coming months, potentially increasing the likelihood of achieving the inflation target. However, he stressed that an underlying inflation rate of 2% had not yet been achieved due to the impact of import costs on product prices.
Despite this, Ueda explained that the BOJ's decision to end its negative interest rate policy in March was based on a "certain level" of confidence in reaching the inflation target. He estimated that this level of certainty was around 75%, and that a further increase to 80-85% could justify raising interest rates.
Ueda also highlighted the potential impact of the government's planned income tax cut in June, higher wages, and a decline in the rate of inflation on personal consumption. These factors could contribute to a further increase in consumer prices and potentially pave the way for an interest rate hike between summer and autumn.
However, Ueda also emphasized the need for a loose monetary environment as long as the underlying inflation rate remained below 2%. He also acknowledged that an excessively weak yen could affect the economy and consumer prices, potentially influencing any decision on raising interest rates.
Regarding the current exchange rate, Ueda declined to comment directly but stated that significant impacts on the wage-price cycle could necessitate a monetary policy response.
Finally, Ueda reiterated that the BOJ had no intention of reviewing its joint statement with the government from 2013, which aims to achieve a 2% inflation rate in a stable and sustainable manner. He acknowledged that the possibility of inflation exceeding 2% was low, but that it could still be a factor in raising interest rates.