On behalf of Bank of Japan (BoJ) Governor Kazuo Ued, Deputy Governor Shinichi Uchida said during the European trading session on Friday that the central bank will continue to raise policy rate in accordance with economic, price, and financial developments, reiterating the hawkish monetary policy stance.

Additional remarks

Stabilising underlying inflation at level around 2% is more important than past.

Underlying inflation approaching 2%.

Financial conditions are accommodative.

Pace and timing of future policy adjustment will be decided based on likelihood of our baseline projections materialising as well as risks.

There is risk of underlying inflation overshooting 2% price target.

Accommodative financial conditions continue to support economic activity even after September rate hike.

Economy, prices moving in line with our baseline forecasts.

Market reaction

No major action is seen in the Japanese Yen (JPY), following remarks from BoJ Governor Ueda. As of writing, USD/JPY is marginally down to near 157.88.

Ueda flags ongoing rate hikes as inflation nears target, lifting Yen outlook

FXS Speechtracker assigns the speech a 8.2/10 score, notably above Governor Ueda’s historic 7.3/10 average, signaling a stronger-than-usual policy signal. The emphasis on continuing to raise the policy rate as underlying inflation approaches and potentially overshoots the 2% target, while financial conditions remain accommodative, marks a clear hawkish shift that is supportive for the Yen.

By stressing that stabilising inflation around 2% is now more important than in the past and that the pace and timing of future adjustments will depend on baseline projections and risks, the speech reinforces expectations of a gradual but persistent normalization path. This combination of rising inflation risks and still-supportive financial conditions underpins a narrative of further rate hikes, which should underpin Yen demand and reduce the appeal of funding trades against the Yen.