The Zhitong Finance App learned that the Bank of Japan (BOJ) raised interest rates to the highest level in 31 years on Friday and sent a signal that it is preparing to continue to push up borrowing costs, joining the ranks of other major central banks in fighting the continuing inflationary pressure caused by soaring oil prices. However, this interest rate hike, which was widely anticipated by the market, failed to boost the yen; on the contrary, the yen weakened. Investors focused on two points: the policy guidelines lacked a clear hawkish tone, and two dovish opposition members advocated patience with interest rate hikes.
The following is an excerpt from Bank of Japan Governor Kazuo Ueda's speech at the post-meeting press conference:
Regarding interest rate hikes of 50 basis points or consecutive interest rate hikes:
“It depends on how the price situation evolves. There are all kinds of possibilities, and we shouldn't rule out any options.”
“We are at a stage where we need to take a close look at all the data. But that doesn't mean you can move slowly. We will carefully analyze the data and act in a timely manner if necessary.”
“As for the future pace of interest rate hikes, we don't have a pre-set idea, such as once every three months. We will decide at every policy meeting how best to ensure that underlying inflation remains stable at 2%.”
Regarding risk factors:
“If energy costs continue to rise again, it may further increase the pressure on wholesale inflation, which will then be transmitted to consumer inflation. This is something we need to be wary of.”
Regarding financial conditions:
“As we raise interest rates, financial conditions are becoming less relaxed... It is important to avoid excessive tightening of financial conditions or triggering drastic asset price adjustments due to excessive interest rate hikes.”
Uncertain about neutral interest rates:
“It is difficult to determine exactly where the neutral interest rate is, so the terminal interest rate is also difficult to determine. Chances are, as we adjust our policies in due course, we will know in advance what level these interest rates are at.”
Regarding inflation:
“To date, our short-term policy focus has been on driving underlying inflation back up from less than 2%. Today, underlying inflation is approaching 2%. If the risk of underlying inflation rising above 2% is realized, it may have a negative impact on the Japanese economy. Stabilizing underlying inflation at 2% is critical. Our policy phase has changed.”