Governor Il says, “We cannot allow prices to rise any higher than this”… Interest rate hike policy to continue

(Tokyo = Yonhap News) Correspondent Do-yeon Lee = Governor Kazuo Ueda of the Bank of Japan announced plans to continue raising interest rates, saying that it is unacceptable for prices to rise any further.

According to the Nihon Keizai Shimbun (Nikkei) on the 17th, Governor Ueda held a press conference in Bangkok, Thailand, where a meeting of finance ministers and central bank governors of the G20 (G20) major countries was held the previous day (local time). Regarding the Bank of Japan's inflation target, the basic inflation rate, he said, "It is generally close to 2%," and "It is unacceptable for it to rise any higher than this."

Regarding the financial environment, Governor Ueda pointed out that the easing situation has continued even after the interest rate hike last month and explained, "We will continue to adjust the degree of easing by raising the policy interest rate."

Governor Ueda, who met with U.S. Treasury Secretary Scott Besant at the G20 Finance Ministers' Meeting held in Asheville, North Carolina, on August 30, said, "We have not had any particular communication" since then.

At the time, Minister Bessant met with Governor Ueda and said that the value of the Japanese yen was undervalued and that he supported Japan's firm measures against it.

In addition, Governor Ueda reiterated his stance to keep an eye on factors that could lead to accelerated inflation, such as rising crude oil prices, increased demand related to artificial intelligence (AI), and the weakening yen.

Regarding the neutral interest rate, which neither overheats nor shrinks the economy, he said, "There is no basis to say that it is definitely in that range," and "I want to judge by looking at whether the interest rate increases so far are having a cumulative effect."

The Bank of Japan raised the short-term policy interest rate, its base interest rate, by 0.25 percentage points from about 1.0% to about 1.25% at the financial policy decision meeting last month.

The next financial policy decision meeting is scheduled for the 29th to 30th. Nikkei reported that the financial market is dominated by the outlook that interest rates will be frozen at this month's meeting, and attention is being paid to whether additional interest rates will be announced at the next meeting in December.

Meanwhile, U.S. Treasury Undersecretary for International Affairs Erin Brown said in an interview with Nikkei on the same day that Prime Minister Takaichi's recently announced "fiscal sustainability" would "bring benefits to Japan."

On the 5th, Prime Minister Sanae Takaichi emphasized "responsible and active finance" and mentioned "fiscal sustainability" several times in a speech expressing her convictions at the extraordinary session of the National Assembly.

Regarding this, Deputy Minister Brown said, "We highly value the Prime Minister and have strong trust in him and the Japanese government."

Nikkei assessed Vice Minister Brown's remarks as an indication that the conflict with the U.S. authorities, who have been concerned about Japan's easing monetary and fiscal policy stance, has begun to resolve.

At the G20 Finance Ministers' meeting last month, Minister Bessant said in a press conference, "I conveyed to the Japanese government that they must stop their reflation policy," and President Donald Trump has been pressuring Prime Minister Takaichi to stop Japan's easing policy, expressing concerns about the weakening yen at the U.S.-Japan summit last month.

Deputy Secretary Brown said Secretary Besant's remarks on reflation "did not dictate any financial policy to the Bank of Japan," but added, "Japan is the largest holder of U.S. Treasury bonds and is keeping an eye on the stability of the Japanese yen."

Regarding the possibility of additional joint intervention in the foreign exchange market if the yen weakens again, he responded, "We are reviewing all options and are continuing close consultations with Japan."