On May 26, Bank of Japan (BoJ) Governor Kazuo Ueda stated that the central bank needs to 'thoroughly discuss' the pros and cons of raising its policy rate at the upcoming monetary policy meeting later this month, even as the situation in the Middle East remains volatile.
Speaking to the press, Ueda stressed that the BoJ will consider the impact of geopolitical developments on Japan's economy, but the decision to raise rates must be based on an overall assessment of inflation and growth outlook. According to him, although uncertainties from the Iran conflict could affect global energy prices and supply chains, Japan's underlying inflation trend is still moving closer to the central bank's 2% target.
The BoJ's May monetary policy meeting is scheduled for May 29-30, with the focus on whether the Japanese economy is strong enough to withstand another round of policy tightening. Earlier, in March, the BoJ ended its eight-year-long negative interest rate policy and raised short-term rates to a range of 0%-0.1%.
Analysts noted that Ueda's mention of 'thorough discussion' suggests the BoJ may continue to raise rates, but at a cautious pace, amid heightened global financial market volatility due to Middle East tensions.
