(Reuters) – The Bank of Japan kept interest rates steady on Friday but decided to start selling its holdings of risky assets, taking another step forward in phasing out remnants of its massive stimulus programme.
Two of the BOJ’s nine board members dissented to the central bank’s decision to keep short-term interest rates at 0.5% and proposed, unsuccessfully, to hike borrowing costs to 0.75%.
Following are excerpts from BOJ Governor Kazuo Ueda’s comments at his post-meeting news conference, which was conducted in Japanese, as translated by Reuters:
UEDA FLAGS INFLATION NEARING 2%, CAUTIONS ON TARIFF RISKS
“My personal view is that underlying inflation is still somewhat below 2%, but approaching that level. As for board member Naoki Tamura’s view, upside price pressure is of course among risks. But I feel that we also need to be mindful of downside economic and price risks, given the impact from U.S. tariffs will start to intensify.”
BOJ SEES MODERATE U.S. TARIFF IMPACT “The U.S. economy has shown some signs of weakness in jobs and consumption since July. But for now, the pass-through of tariff costs on inflation seems moderate. The Fed’s rate cut is likely to underpin the U.S. economy.
TARIFFS HURT, BUT BROADER ECONOMY REMAINS RESILIENT
“As for Japan’s economy, the impact of tariff is weighing on manufacturers’ profits. But so far, it is not affecting much Japan’s economy as a whole including jobs, wages and capital expenditure. We expect underlying inflation to continue heading toward 2%.”
BOJ STICKS TO OUTLOOK
“There’s no need to change our baseline scenario shown in our quarterly outlook report in July. Japan’s economy may face pressure from tariffs but will likely withstand the hit. We expect underlying inflation to stagnate for some time, but then gradually accelerate toward 2%.”
UNCERTAINTY OVER OUTLOOK
“However, there continues to be strong uncertainty over the outlook.”
GRADUAL TIGHTENING IF GROWTH, INFLATION STAY ON TRACK
“Real interest rates remain very low. If our economic and price forecasts materialise, we will continue to raise interest rates in accordance to improvements in the economy and prices.”
BOJ TO MONITOR TARIFF IMPACT
“There is high uncertainty over the impact of each country’s tariff policy. As such, we will scrutinise without any pre-set idea overseas and domestic economic conditions as well as market developments.”
(Reporting by Leika Kihara; Editing by Sherry Jacob-Phillips)
Comments