BoJ’s Ueda: Japan's economy recovering moderately albeit with some weaknesses
Bank of Japan (BoJ) Governor Kazuo Ueda said on Tuesday that the Japanese economy is recovering moderately albeit with some weaknesses. Ueda added that price trend is approaching 2%.
Key quotes
Japan's economy recovering moderately albeit with some weaknesses.
September tankan showed business sentiment in good shape.
Underlying inflation approaching 2%.
Economy, prices moving in line with our baseline forecasts.
Financial conditions are accommodative.
Even after September rate hike, accommodative financial conditions continue to support economic activity.
Will continue to raise policy rate in accordance with economic, price, financial developments.
Pace and timing of future policy adjustment will be decided based on likelihood of our baseline projections materialising as well as risks.
Important to anchor underlying inflation around 2%.
Market reaction
At the time of writing, the USD/JPY pair is up 0.18% on the day at 158.20.
Ueda keeps BoJ on gradual tightening path as Yen focus stays on inflation
FXS Speechtracker scores the speech at 7.2, exactly in line with Ueda’s historic average, signaling a consistent policy tone rather than a surprise shift. The emphasis on the economy “recovering moderately,” favorable business sentiment, and accommodative financial conditions, even after the September rate hike, points to a mildly hawkish bias, as BoJ remains committed to further gradual rate increases while avoiding aggressive tightening.
By stressing that underlying inflation is approaching 2% and that economy and prices are moving in line with baseline forecasts, Ueda reinforces confidence that BoJ is on track toward the inflation target, which supports a constructive backdrop for the Yen. The pledge to “continue to raise policy rate” in accordance with economic, price, and financial developments, and the importance of anchoring inflation around 2%, underpins expectations of a slow but ongoing normalization, likely offering medium-term support to the Yen while limiting immediate volatility.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
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