(Bloomberg) — Bank of Japan Governor Kazuo Ueda said interest-rate hikes are “nearing” as inflation and economic trends develop in line with the central bank’s forecasts, helping strengthen the yen without explicitly supporting an increase in December.
Most Read from Bloomberg
“We will adjust the degree of monetary easing at the appropriate time if we become confident or certain that the economy will move as forecasted by our economic and price outlook — particularly that the underlying inflation rises toward 2%,” Ueda said in a Nikkei interview conducted Thursday and published Saturday in Tokyo. The next rate hike is “nearing in the sense that economic data are on track,” he said.
The yen strengthened to briefly reach 149.47 against the dollar from around 150.42 just before the interview was published. Japan’s currency had already gained nearly 1% earlier Friday as market bets on a December rate hike rose following data showing inflation in Tokyo accelerating more than expected.
While the central bank chief usually speaks with a media outlet once or twice a year, the latest interview comes ahead of the December board gathering and may be part of the BOJ’s efforts to enhance its communications. The central bank faced criticism over its messaging in the leadup to its July 31 rate hike. The move surprised some market participants, helping to set the stage for market turmoil in early August.
The BOJ’s next policy meeting takes place Dec. 18-19, followed by another gathering on Jan. 23-24. The key overnight policy rate is still extremely low in comparison with global levels at 0.25%.
The BOJ governor said wage growth is approaching a level consistent with 2% inflation and that he’d like to keep a close eye on wage trends, particularly momentum in the 2025 spring wage negotiations. While confirming that momentum will take a little while longer, that doesn’t mean the BOJ can’t decide on policy before then, he added.
Ueda also flagged the need to keep a watchful eye on the US economy given the incoming Trump administration. The president-elect’s threat of imposing hefty tariffs on other nations has clouded the outlook for global trade.
The governor said there was “a big question mark” hanging over the trajectory of the world’s biggest economy. Ueda has previously referenced uncertainty over the US economy to help cool policy move expectations.
Still, investors are increasingly aligning with economists on the view that the BOJ will more likely raise rates in December than wait until January. While the chance of a move in December was priced in at around 30% in overnight swaps at the beginning of November, expectations finished this week at around 66%.