Bank of Japan Governor: "Inflation at Highest Level in 30 Years, Will Raise Rates"

"Will Continue Raising Rates"

Kazuo Ueda, Governor of the Bank of Japan, solidified his stance on the 27th to continue raising interest rates, stating that Japan's inflation rate is "between 1.5 and 2.0%, the highest level in 30 years."

According to Nihon Keizai Shimbun (Nikkei) and Kyodo News, Governor Ueda announced at an event hosted by the Bank of Japan in Tokyo, attended by domestic and international economists and central bank officials, that Japan's consumer prices are rising again due to increases in food prices such as rice.

He added, "The impact of rising food prices will diminish," and emphasized the need to be cautious about the potential impact on the underlying inflation rate.

Assuming that the economic growth rate and inflation rate forecasts are realized, he reiterated his existing stance to "continue raising policy interest rates to adjust the degree of monetary easing."

Governor Ueda expressed caution regarding the imposition of U.S. tariffs, stating that "the situation has become highly uncertain," and indicated a careful approach to policy decisions. The Bank of Japan raised interest rates for the first time in 17 years at the Monetary Policy Meeting in March last year, ending the negative interest rate policy, and continued to raise rates in July last year, attempting to move away from large-scale monetary easing.

Large-scale monetary easing was a policy to suppress interest rates to very low levels and increase the money supply to recover the Japanese economy from deflation (a decline in prices during an economic downturn). However, on the 1st of last month, the Bank of Japan froze the benchmark interest rate at "about 0.5%" for the second consecutive time, considering U.S. tariff policies.

Additionally, the real GDP growth rate forecast for fiscal year 2025 (April 2025 to March 2026) was presented as 0.5%, a 0.6 percentage point decrease from the previous forecast. The inflation rate is expected to be 2.2%, 0.2 percentage points lower than the previous forecast.

Jang Ji-min, Hankyung.com Guest Reporter newsinfo@hankyung.com