BOJ to Make Appropriate Rate Decision at Next Meeting: Ueda

Nagoya, Dec. 1 (Jiji Press)–Bank of Japan Governor Kazuo Ueda said Monday that the central bank will make an appropriate decision on whether to raise interest rates at its next monetary policy meeting scheduled for Dec. 18-19. “The bank will examine and discuss economic activity and prices at home and abroad as well as developments in financial and capital markets…based on various data and information, and will consider the pros and cons of raising the policy interest rate and make decisions as appropriate,” Ueda said in a speech in Nagoya, the capital of the central Japan prefecture of Aichi. The BOJ will continue to hike rates and adjust the degree of monetary accommodation “in accordance with improvement in economic activity and prices,” he added. The bank is “actively collecting information regarding firms’ stance toward raising wages through its head office (in Tokyo) and branches” elsewhere in the country, Ueda also said, indicating that a final decision will be based on developments linked to next year’s “shunto” labor-management wage negotiations in the spring. He likened a rate increase to “easing off the accelerator as appropriate” toward achieving stable economic growth and price developments, not “applying the brakes on economic activity.” Adjusting the degree of policy accommodation appropriately “will be necessary to smoothly achieve the (BOJ’s) price stability target (of 2 pct) while ensuring stability in financial and capital markets, and to guide Japan’s economy onto a long-term growth path,” Ueda said. The BOJ last raised its target for the unsecured overnight call rate, the country’s benchmark short-term interbank lending rate, in January this year, to around 0.5 pct from around 0.25 pct. The focal point now is whether the central bank can gain the understanding of Prime Minister Sanae Takaichi for an additional rate hike as she favors monetary easing to promote economic growth. An appropriate adjustment of policy “will ultimately lead to the success of the efforts undertaken by the government and the bank thus far,” Ueda said. Regarding the upcoming shunto, the governor said that “corporate profits, which are the source of wage hikes, are expected to remain at high levels on the whole.” He added that currency market fluctuations are “more likely to affect prices” than in the past and indicated that he will pay close attention to whether exchange rate movements will accelerate inflation. The top central banker also vowed to carefully monitor changes in exchange rates during discussions with business leaders from the Chubu central Japan region including Aichi. END [Copyright The Jiji Press, Ltd.]