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Bank of Japan chief Kazuo Ueda said Friday that financial markets remain “unstable,” adding he will watch their developments “with extremely high” vigilance after stocks showed volatile moves earlier this month following the BOJ’s latest interest rate hike.
“There is no change in our basic stance to adjust the degree of monetary easing” if the central bank confirms that its 2 percent inflation goal has been attained, Ueda told a parliamentary session.
Regarding the possibility of additional interest rate hikes, the governor said the BOJ will make a decision after cautiously examining the impact of its latest rate hike in July on the economy and prices.
Bank of Japan Governor Kazuo Ueda (standing) speaks at a parliament session in Tokyo on Aug. 23, 2024, with Finance Minister Shunichi Suzuki (L, front) attending. (Kyodo) ==Kyodo
Ueda’s stance that the central bank will continue to seek policy normalization sent the yen firmer against the U.S. dollar Friday morning, but the rise was limited as he appeared considerate of market developments.
The yen had appreciated sharply after Ueda said on July 31 after deciding on an interest rate hike that rates could be raised further later this year, leading to a historic loss on the Nikkei stock index, coupled with concerns about the U.S. economy.
Ueda expressed the view that the developments in the Japanese stock market were caused by concerns over a potential U.S. recession following weaker-than-expected economic data.
Also at the session, Finance Minister Shunichi Suzuki reiterated the government’s position that the Japanese economy is “not in a state of deflation,” but warned of the possibility that it could come back.
On July 31, the BOJ raised its short-term interest rate to around 0.25 percent from a range of zero and 0.1 percent, in a further shift toward monetary policy normalization.
The Nikkei benchmark registered its largest-ever point loss on Aug. 5 following the BOJ’s decision and Ueda’s remarks after its policy meeting, but it ended the following day with a record-high point gain.
Stocks have further recovered after BOJ Deputy Governor Shinichi Uchida expressed a cautious stance on Aug. 7 over monetary tightening, saying the BOJ would not raise interest rates further if financial markets are unstable.
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