Hawkish remarks by BOJ Governor strengthen the yen – key takeaways

Key statements by Ueda during the press conference following the BOJ's decision to hike rates:

• Japan's economy continues to experience moderate growth, and core inflation is gradually approaching the 2% target.
• There is a risk of exceeding the inflation target due to more aggressive price and wage increases by companies, which necessitates vigilance and justifies further rate hikes.
• The Bank of Japan will consistently continue its monetary tightening cycle – gradually adjusting the degree of easing based on economic and price indicators.
• The phase of monetary policy has undergone a key shift: the short-term goal focuses on the sustainable and stable anchoring of inflation around 2%.
• No rigid schedule regarding the timing of future rate hikes. The Bank will assess the situation flexibly at each meeting, taking into account external risks (e.g., the Middle East or demand in the AI sector).
• Suggestion of continuing rate hikes despite dissenting opinions from some board members. Ueda signals that potential resistance from the dovish faction will not stop the Bank of Japan from executing its plan.

Maintaining a hawkish stance and refusing to yield to dissent within the board were interpreted by the market as a clear signal that further rate hikes are inevitable. In response to the BOJ Governor's remarks, the Japanese currency is trimming its earlier losses. The USDJPY exchange rate is sliding below the 157 level and the 38.2 retracement of the last downward wave. Despite this, the increase in USDJPY during today's session is quite substantial.