Tokyo—Bank of Japan governor Kazuo Ueda indicated Friday that officials could hike interest rates again if inflation and the economy performed as expected, weeks after turmoil caused by a surprise increase earlier this month.
The remarks come after markets were sent into a spin by the bank’s second cut in 17 years on July 31, hours 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 comments saw the yen strengthen against the dollar Friday, hitting 145.29 to the greenback at one point, from a day’s high above 146. AFP
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