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On Tuesday, Bank of Japan Governor Kazuo Ueda gave a new indication of the bank’s readiness to continue raising interest rates, stressing that stabilizing core inflation around the 2 percent target has become “more important than before,” in a noticeable tightening of the bank’s language before its expected meeting at the end of October (October), amid mounting pressures from raw material and energy prices, a weak yen, and strong demand linked to artificial intelligence.

Ueda's comments come ahead of the two-day monetary policy meeting that ends on October 30, as investors await new quarterly forecasts for growth and inflation for clues on the timing of the next increase in interest rates. Ueda said, in a speech before the annual meeting of securities companies, that economic developments and prices are generally moving in accordance with the expectations of the Bank of Japan, and that the economy continues to recover at a moderate pace, while the quarterly Tankan survey showed the strength of corporate sentiment. He added that the rise in raw material costs is pushing up wholesale price inflation, and that these pressures are gradually being transmitted to consumer prices, coinciding with the continued rise in long-term inflation expectations.

Ueda stressed that financial conditions remain accommodative and support economic activity even after the increase in interest rates last month, stressing that the bank will continue to raise borrowing costs to adjust the degree of monetary support. He said: “It has become more important than before to ensure the stability of core inflation around 2 percent,” so that there are no risks of inflation exceeding the target, which could cause harm to the economy. This wording carries special importance. In its September rate hike statement, the bank merely said that keeping core inflation around the target was “important,” while Ueda now used the expression “more important than before,” referring to policymakers’ increased focus on the risks of rising prices.

Ueda identified a group of risks that could push core inflation to exceed 2 percent, foremost of which is the rise in energy prices linked to the US-Israeli war on Iran, in addition to the weak yen and strong demand linked to artificial intelligence. The weakness of the Japanese currency represents a direct channel for the transmission of inflation, as it increases the cost of imports, especially energy, raw materials, and food.

This coincided with a slowdown in investor money flows into US money market funds. Which pushed US Treasury bill yields to rise. Total flows into money market funds amounted to only $158 billion during the first 9 months of the year, compared to $823 billion during the entire year 2025. Analysts said that the slowdown in flows weakened demand for Treasury bills, pushing their yields higher in recent sessions.

Barclays Bank estimates that the US Treasury will issue about $225 billion in Treasury bills this October, and about another $160 billion next November. This would push yields higher as the market is flooded with short-term issues. Currently, the increase in Treasury bill yields also reflects growing uncertainty about the path of US interest rates.