BoJ's Ueda Flags More Rate Hikes If Economy, Inflation On Track

Bank of Japan governor Kazuo Ueda indicated Friday that officials could hike interest rates again if inflation and economy performed as expected, weeks after turmoil caused by a surprise increase earlier this month

Tokyo, (UrduPoint / Pakistan Point News - 23rd Aug, 2024) Bank of Japan governor Kazuo Ueda indicated Friday that officials could hike interest rates again if inflation and economy performed as expected, weeks after turmoil caused by a surprise increase earlier this month.

The remarks were his first to lawmakers since markets were sent into a spin by the bank's second cut in 17 years on July 31, which came before the Federal Reserve indicated it was set to start cutting.

The decision, and hints at more to come, sparked a sharp unwind of the "yen carry trade" -- in which investors use the cheaper currency to buy higher-yielding assets such as stocks -- and sent equities plunging and the yen soaring.

"We will continue to adjust the degree of monetary easing if we can confirm a rising certainty that the economy and prices will stay in line with our forecasts," Ueda told parliament just as data showed core inflation edged higher in July and remained well above the bank's target.

He also warned that "financial and capital markets at home and abroad remain volatile," adding "it is necessary to monitor (the markets) with a high sense of urgency".

The sell-off on August 5, which was also fuelled by weak US jobs data that fanned recession fears, saw equity markets around the world plunge with Tokyo's Nikkei 225 diving more than 12 percent -- its worst day since Black Monday in 1987.

Markets have since recovered but traders remain on edge about any further disruptions, with the Fed expected to cut rates next month and possibly again before the end of the year.

The BoJ's deputy governor earlier this month said officials would stick to their ultra-loose monetary policies given market volatility.

Earlier, figures showed Japan's core consumer price index had hit 2.7 percent last month, in line with expectations but up slightly from June.

Increases in the cost of electricity and gas, processed food and car insurance premiums were among the areas contributing to the uptick, the internal affairs ministry said in a statement.

While price increases at the petrol pump slowed, that was offset by rising electricity and natural gas fees, the ministry added.

Excluding fresh food and energy, Japanese prices rose 1.9 percent in July -- also in line with expectations -- following a 2.2 percent rise in June.