Kazuo Ueda, Governor of the Bank of Japan, stated in the Parliament on Wednesday (4th) that if Japan's economic and price expectations are met, the central bank will continue to consider raising interest rates. However, he specifically noted that the instability in the Middle East could have a significant impact on both the Japanese and global economies. Ueda pointed out that geopolitical conflicts might lead to rising energy costs and market volatility, having a "huge impact" on Japan's economy. He emphasized that the central bank will closely monitor the development of the situation.
Ueda's cautious stance suggests a lower likelihood of a rate hike following the Bank of Japan's meeting on March 19. Currently, market traders estimate only a 6% probability of a rate increase to 0.75% in March. However, the probability of a rate hike in April is expected to rise significantly to 60%. Ueda also mentioned that the Bank of Japan is "very carefully" analyzing the impact of exchange rate fluctuations on prices and reiterated that wages need to grow significantly to maintain a stable 2% inflation target.
