After meeting with Group of 20 counterparts in Asheville, North Carolina, Governor Kazuo Ueda said the Bank of Japan will decide policy with the possibility of stronger-than-expected inflation in mind. Speaking alongside Finance Minister Satsuki Katayama, he framed it as a risk-management stance as underlying inflation draws close to the 2% goal. "From the perspective of conducting policy with a risk-management approach as the underlying inflation rate approaches 2%, we have come to believe that we need to pay greater attention than before to upside risks in our policy conduct," he said.
The board will conduct its standard thorough discussion when it convenes Sept. 17-18. Ueda noted that the trajectory of prices is now nearing the BOJ's 2% objective, and he pointed out that the broader data still align with the bank's projections. "I think the economic data have been broadly in line with the economic outlook presented in the July Outlook Report and with the picture I described at the press conference," he said, adding there has been "no major change" in the policy approach he laid out then.
Ueda's remarks may further fuel speculation about a rate increase later this month, and he chose not to knock back those expectations. With overnight index swaps indicating a September move is fully reflected in prices, he declined to comment on market positioning. The governor has stressed careful messaging since a July 2024 hike surprised some traders and stirred volatility.
Japan's 10-year government bond yield hit 3% on Tuesday, a three-decade high. Ueda said the rise in yields reflects global trends, and Katayama added that at the G-20 gathering there were no expressions of concern about Japan's fiscal position.
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Following remarks this week from US Treasury Secretary Scott Bessent urging appropriate BOJ steps, Ueda delivered his comments, further stoking wagers on a near-term change.
The jump in yields also arrived as it became clear ministries will seek an all-time high level of spending for the coming fiscal year, sharpening the focus on Prime Minister Sanae Takaichi's fiscal agenda. A large chunk of the increase stems from an accounting shift linked to her push to stop the long habit of adding extra budgets on top of the yearly plan.
What matters next for your wallet: the BOJ's Sept. 17-18 meeting and the decision expected on the 18th. With swaps already pointing to a move and Ueda emphasizing vigilance on price risks, the path the BOJ sketches for further tightening will likely matter as much as any single rate step.