An employee shows yen at Hana Bank's counter for counterfeiting response in Seoul. [Photo=Yonhap News]
Kazuo Ueda, the Governor of the Bank of Japan, indicated that there may be an additional increase in the short-term policy interest rate during the monetary policy meeting scheduled for mid-June.
According to Yonhap News on June 3, Ueda made these remarks at a seminar hosted by Kyodo News, stating, "Although the situation in the Middle East is uncertain, it is essential to discuss the appropriateness of a rate hike."
As a result, there is growing speculation that the current interest rate of approximately 0.75% could be raised at the monetary policy meeting on June 15-16. The market anticipates a likely increase to 1.0%, a rise of 0.25 percentage points.
He noted, "Given the impact of high oil prices, we cannot ignore the risk that inflation could exceed expectations," and warned that delaying a rate hike could impose significant burdens on both the economy and the market and financial systems, reiterating the need for a timely increase.
Previously, Ueda assessed during a press conference following the G7 finance ministers and central bank governors' meeting in Paris on May 19 that the instability in the Middle East is gradually affecting Japan's economy and inflation.
The pressure for a rate hike from the Bank of Japan is also linked to the recent depreciation of the yen. On the same day, the yen-dollar exchange rate surged to 160 yen per dollar in the Tokyo foreign exchange market, returning to levels seen before the Japanese government and central bank's large-scale currency intervention.
Despite rising inflationary pressures due to the situation in the Middle East, analysts suggest that the Japanese government's continued expansionary fiscal policies, including oil price subsidies and supplementary budgets, are exacerbating the yen's depreciation.
Consequently, there is a growing consensus among other members of the Bank of Japan's policy board regarding the need for a rate hike to defend the yen's value and combat high inflation. Junko Koeda, who voted in favor of keeping the interest rate unchanged during the last decision, also mentioned in a seminar on May 21 that it is necessary to continue raising the policy rate to adjust the degree of monetary easing.
Kyodo News predicts that the Bank of Japan will closely examine the economic impact of the Middle East situation before making a final decision ahead of the meeting.
According to Yonhap News on June 3, Ueda made these remarks at a seminar hosted by Kyodo News, stating, "Although the situation in the Middle East is uncertain, it is essential to discuss the appropriateness of a rate hike."
As a result, there is growing speculation that the current interest rate of approximately 0.75% could be raised at the monetary policy meeting on June 15-16. The market anticipates a likely increase to 1.0%, a rise of 0.25 percentage points.
He noted, "Given the impact of high oil prices, we cannot ignore the risk that inflation could exceed expectations," and warned that delaying a rate hike could impose significant burdens on both the economy and the market and financial systems, reiterating the need for a timely increase.
Previously, Ueda assessed during a press conference following the G7 finance ministers and central bank governors' meeting in Paris on May 19 that the instability in the Middle East is gradually affecting Japan's economy and inflation.
The pressure for a rate hike from the Bank of Japan is also linked to the recent depreciation of the yen. On the same day, the yen-dollar exchange rate surged to 160 yen per dollar in the Tokyo foreign exchange market, returning to levels seen before the Japanese government and central bank's large-scale currency intervention.
Despite rising inflationary pressures due to the situation in the Middle East, analysts suggest that the Japanese government's continued expansionary fiscal policies, including oil price subsidies and supplementary budgets, are exacerbating the yen's depreciation.
Consequently, there is a growing consensus among other members of the Bank of Japan's policy board regarding the need for a rate hike to defend the yen's value and combat high inflation. Junko Koeda, who voted in favor of keeping the interest rate unchanged during the last decision, also mentioned in a seminar on May 21 that it is necessary to continue raising the policy rate to adjust the degree of monetary easing.
Kyodo News predicts that the Bank of Japan will closely examine the economic impact of the Middle East situation before making a final decision ahead of the meeting.
* This article has been translated by AI.
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