Bank of Japan (BoJ) Governor Kazuo Ueda said on Tuesday that long-term interest rates are determined in markets, reflecting various factors. Ueda added that the central bank will continue to closely monitor bond markets.

Key quotes

Generally speaking, long term interest rates are determined in markets, reflecting various factors.

Will continue to closely monitor bond markets.

Underlying inflation is approaching 2%.

Important to anchor inflation around 2% now.

Market reaction

At the time of writing, the USD/JPY pair is down 0.22% on the day at 158.28.

Ueda flags market-led yields as inflation nears target, supporting firmer Yen

FXS Speechtracker shows a 6.4/10 score versus Governor Ueda’s 6.8/10 historic average, pointing to a slightly softer but still constructive tone. The emphasis that long-term rates are set by markets and that bond markets will be closely monitored suggests a cautious shift away from strict yield control, which leans modestly hawkish for the Yen.

Ueda’s remark that underlying inflation is approaching 2% and must be anchored around that level reinforces the case for gradually normalizing policy. This combination of market-driven yields and near-target inflation supports expectations of reduced accommodation over time, underpinning a bias toward a stronger Yen if data continue to firm.