Japan: "Will Raise Interest Rates Further If Inflation Meets Expectations"

March Interest Rate Maintained at 0.5% Annually

The Bank of Japan kept its benchmark interest rate unchanged at 0.5% annually on the 19th, as market expected. However, it hinted at the possibility of additional rate hikes.

Bank of Japan Governor Kazuo Ueda said at a press conference after the monetary policy meeting, "If the economy and prices move as expected, we will continue to raise the benchmark interest rate." He added, "Since real interest rates are at a very low level, if economic and price forecasts are realized, we will adjust the policy rate to control the degree of monetary easing." Regarding economic and price trends, he said they are "generally following the expected trajectory." However, he mentioned that some policy committee members expressed concerns about inflation risks during this meeting.

Governor Ueda assessed that "uncertainty has increased since the January meeting" regarding the global economy. In particular, he emphasized the need to closely analyze the impact on the US and global economies regarding US President Donald Trump's protectionist stance and tariff policies, saying these factors contain "very large uncertainties." He added, "We will decide on monetary policy after carefully examining what impact it will have on Japan's inflation and economic outlook."

Regarding the forecast that Japanese companies will raise worker wages by an average of over 5% in this year's spring labor negotiations, he acknowledged that "it's a somewhat strong movement within the expected range" and recognized that wage increases are spreading. Regarding the recent rise in long-term interest rates in financial markets, he said, "We decided in July last year that we would respond promptly if interest rates rise differently from normal market flows," adding, "We judge that this is not such a situation at present."

Reporter Lee Sohyun y2eonlee@hankyung.com