Statements by Bank of Japan Governor Ueda at a press conference by Reuters

(Reuters) – The Bank of Japan raised interest rates on Friday to their highest levels since the 2008 global financial crisis and revised its inflation forecast upward, underscoring its confidence that wage increases will keep inflation stable around its 2% target.

At its two-day meeting that concluded on Friday, the Bank of Japan raised the short-term interest rate from 0.25% to 0.5% – a level Japan has not seen in 17 years. It was voted on 8-1, with board member Toyuki Nakamura dissenting.

Below are excerpts from Bank of Japan Governor Kazuo Ueda’s remarks at his post-meeting press conference, which was held in Japanese, as translated by Reuters:

High wages

“Many companies say they will continue to raise wages… Various data show the US economy is flat. Markets have been stable as the overall direction of Trump’s policies becomes clear. While import price growth remains weak year-on-year, a weak yen drives costs Import to rise.”

Policy price

“There is no change in our view on raising interest rates and adjusting the degree of monetary support if the economy and prices move in line with our expectations.”

“The timing and pace of adjusting monetary support will depend on economic developments and price developments at that time. We do not have any predetermined idea. We will make a decision at each policy meeting by considering economic and price developments as well as risks.”

Sharp improvement in inflation expectations

“The rise in core inflation is moderate. I don’t think we’re seriously behind the curve on inflation.”

Impact of Trump’s tariff policies

“There is too much uncertainty about the size of the tariffs. Once there is more clarity, we will take that into our forecasts and reflect it in setting policy.”

“It is necessary to raise interest rates in line with developments in the economy and prices. We also need to see how interest rate increases affect the economy. It is therefore appropriate to raise interest rates gradually in several stages, while carefully studying the impact of our movements.”

Final price

“There is no change in our view on the neutral rate, which in our estimation is spread in a wide range. The estimated range has not changed much. Regarding the distance to the neutral rate, it is true that it has been shortened after the interest rate hike. To 0.5% but there is still a distance “Big.”

“BoJ estimates show that the neutral rate, in nominal terms, is in the range of 1%-2.5%. There is still some distance from this range, given that the short-term rate is 0.5%. Of course, we need to deepen analyzes on where the neutral rate is.” Because this may be affected by demographic and structural changes in the economy, we will do our best but it is difficult to know this in real time.

On whether Japan is still in deflation?

“The government has a slightly different definition of deflation compared to ours, where we focus on achieving the 2% inflation target sustainably… In terms of the common definition of deflation, which is for the economy to avoid falling prices, it looks like this: Japan has moved away from this to an extent.” Of course, the risk of Japan falling into deflation again in the long term is not zero, but the chance seems very low.

“The sharp rise in inflation during FY2025 is mostly due to cost-increasing pressures expected in the first half of that year, which are likely to dissipate in the latter half. As such, if wages rise steadily, we can expect real wages to shift higher.” “to the positive.”