Bank of Japan Governor Kazuo Ueda: There is no immediate need for an interest rate hike! The yen comes under renewed pressure.
2026-04-28 15:20:54
Bank of Japan Governor Kazuo Ueda stated clearly at a press conference following the Bank of Japan's monetary policy meeting on Tuesday (April 28) that there is currently no need for an immediate interest rate hike. He pointed out that the uncertainty surrounding the situation in the Middle East has reduced the likelihood of price and economic prospects materializing, and the central bank needs to take some more time to confirm its impact on prices and the economy. Ueda emphasized that monetary policy will be adjusted according to the degree to which risks materialize, ensuring that it does not lag behind the situation.
The Bank of Japan (BOJ) announced after a two-day monetary policy meeting that it would maintain its policy rate at 0.75%. This marks the third consecutive time the BOJ has held its rate steady since the December 2025 rate hike. BOJ Governor Kazuo Ueda revealed that three of the nine members of the policy board—Hiroshi Takada, Naoki Tamura, and Junko Nakagawa—voted against the proposals. Takada suggested considering "CPI that has reached the target level," and Tamura proposed adding the phrase "potential inflation is consistent with the inflation target" to the outlook report; both proposals were rejected. Ueda stated that as governor, he must take the dissent of the three committee members seriously. He could not predict how many months it would take to determine the timing of the next rate hike and admitted that guiding monetary policy under the current circumstances is extremely difficult.
Regarding price trends, Kazuo Ueda pointed out that it remains unclear whether rising energy prices will affect underlying inflation. Overall inflation will remain high for some time, but this does not mean that underlying inflation is also rising. He expects underlying inflation to remain around 2% in the second half of fiscal year 2026, and inflation to reach the Bank of Japan's 2% target between the second half of fiscal year 2026 and fiscal year 2027. Currently, real interest rates are at extremely low levels, and the Bank of Japan will continue to raise policy rates and adjust the degree of monetary easing based on economic activity, prices, and financial conditions.
Ueda also emphasized the need to closely monitor the risk of a significant upward revision in inflation to avoid negative impacts on the economy. While current underlying inflation is slightly below 2%, higher oil prices could affect other prices to a greater extent than before. He cautioned that it is not always clear whether price overshooting or an economic shock will occur first, therefore careful assessment is essential.
Kazuo Ueda believes that despite some weakness, the Japanese economy is recovering moderately and showing some resilience. However, he also warns of the need to be wary of a further slowdown, depending on the level of supply shocks. The outlook report is based on the view of falling oil prices, but due to the situation in the Middle East, Japan's economic growth may slow in fiscal year 2026.
Kazuo Ueda elaborated on the conditions for raising interest rates: if the current supply shock triggers a chain reaction, then a rate hike will be necessary. Upside risks to inflation may be one reason for a rate hike, but not the only one. He will closely monitor the impact of developments in the Middle East on financial and foreign exchange markets, the Japanese economy, and prices, assessing the likelihood of the baseline scenario while considering the timing and pace of adjusting policy rates. The central bank will implement monetary policy appropriately to ensure it does not fall behind the times. Sustainability, the relationship between risk and the economy, and prices are currently difficult to assess; therefore, maintaining the status quo is a prudent choice at this stage.
Kazuo Ueda's speech sent a clear signal of "wait and see": the situation in the Middle East is the biggest variable at present, and the Bank of Japan is neither in a hurry to raise interest rates nor abandon its tightening policy. The opposition of three committee members to maintaining the interest rate highlights that internal divisions have reached their most severe level during Ueda's tenure, and market expectations for a rate hike in June or July have not subsided. Ueda's repeated emphasis on the balance between "confirming risks" and "not falling behind the times" means that the Bank of Japan is walking a tightrope, highly dependent on data and prone to reversals. In the coming months, oil price trends, the yen exchange rate, and supply chain stability will be key factors in determining the pace of policy.
Following Kazuo Ueda's speech, the yen came under renewed pressure, with the USD/JPY pair rebounding to around 159.40, recovering most of the losses following the Bank of Japan's interest rate decision.
Q1: Why does Kazuo Ueda believe that there is no need to raise interest rates immediately?
A: Ueda stated that the uncertainty surrounding the situation in the Middle East has reduced the likelihood of the expected economic and price outlook for Japan being realized. The central bank needs more time to confirm the actual impact of rising oil prices on businesses and households, and whether it will trigger widespread secondary effects (such as a spiral of rising wages and prices). He explicitly stated that he "hopes to take more time to confirm the impact of the Middle East situation," therefore maintaining the interest rate at 0.75% at this stage is an appropriate choice.
Q2: How did Ueda respond to the objections of three committee members?
A: Ueda stated that "the objections of the three committee members must be taken seriously," acknowledging significant internal divisions. However, he also emphasized that as governor, he needs to make decisions based on the overall baseline scenario and risk assessment. The rejection of Takada and Tamura's proposals regarding "CPI already met" and "consistent potential inflation" indicates that most committee members believe the conditions for an immediate interest rate hike have not yet been met.
Q3: What is the difference between "baseline inflation" and "overall inflation" as mentioned by Ueda?
A: Overall inflation includes volatile items such as energy and food, and is currently at a high level due to high oil prices. Underlying inflation (also known as core-core inflation or underlying inflation) eliminates these short-term fluctuations and better reflects the long-term trend of prices. Ueda points out that although overall inflation is slightly higher in the short term, underlying inflation is still slightly below 2%, so the central bank cannot simply raise interest rates just because overall inflation is rising.
Q4: What exactly does Ueda mean by "the chain reaction caused by the supply shock"?
A: This refers to the situation in the Middle East leading to disruptions in crude oil supply or soaring transportation costs, pushing up energy prices and subsequently affecting downstream industries such as manufacturing raw materials, logistics, and food processing, ultimately triggering a general price increase. If this chain reaction becomes apparent and persistent, even with a slowdown in economic growth, the Bank of Japan may be forced to raise interest rates to curb runaway inflation expectations.
Q5: How does Ueda assess the resilience and risks of the Japanese economy?
A: Ueda believes the Japanese economy is "moderately recovering" and "possesses a certain degree of resilience," primarily reflected in service sector consumption and corporate investment. However, he also warns of a potential "further economic slowdown," as rising oil prices will depress corporate profits and household real income, particularly impacting small and medium-sized enterprises and low-income groups. He specifically points out that economic growth may slow in fiscal year 2026, which is directly related to the duration and severity of the situation in the Middle East.
At 15:19 Beijing time, the USD/JPY exchange rate is currently at 159.40/41.
Internal divisions have widened significantly, and the dissent of three committee members has drawn attention.
The Bank of Japan (BOJ) announced after a two-day monetary policy meeting that it would maintain its policy rate at 0.75%. This marks the third consecutive time the BOJ has held its rate steady since the December 2025 rate hike. BOJ Governor Kazuo Ueda revealed that three of the nine members of the policy board—Hiroshi Takada, Naoki Tamura, and Junko Nakagawa—voted against the proposals. Takada suggested considering "CPI that has reached the target level," and Tamura proposed adding the phrase "potential inflation is consistent with the inflation target" to the outlook report; both proposals were rejected. Ueda stated that as governor, he must take the dissent of the three committee members seriously. He could not predict how many months it would take to determine the timing of the next rate hike and admitted that guiding monetary policy under the current circumstances is extremely difficult.
Inflation Outlook: Overall inflation is expected to be high in the short term, but underlying inflation still needs to be confirmed.
Regarding price trends, Kazuo Ueda pointed out that it remains unclear whether rising energy prices will affect underlying inflation. Overall inflation will remain high for some time, but this does not mean that underlying inflation is also rising. He expects underlying inflation to remain around 2% in the second half of fiscal year 2026, and inflation to reach the Bank of Japan's 2% target between the second half of fiscal year 2026 and fiscal year 2027. Currently, real interest rates are at extremely low levels, and the Bank of Japan will continue to raise policy rates and adjust the degree of monetary easing based on economic activity, prices, and financial conditions.
Ueda also emphasized the need to closely monitor the risk of a significant upward revision in inflation to avoid negative impacts on the economy. While current underlying inflation is slightly below 2%, higher oil prices could affect other prices to a greater extent than before. He cautioned that it is not always clear whether price overshooting or an economic shock will occur first, therefore careful assessment is essential.
Economic assessment: The Japanese economy is resilient, but supply shocks should be watched closely.
Kazuo Ueda believes that despite some weakness, the Japanese economy is recovering moderately and showing some resilience. However, he also warns of the need to be wary of a further slowdown, depending on the level of supply shocks. The outlook report is based on the view of falling oil prices, but due to the situation in the Middle East, Japan's economic growth may slow in fiscal year 2026.
Monetary Policy Path: Conditions for Interest Rate Hikes and Risk Assessment
Kazuo Ueda elaborated on the conditions for raising interest rates: if the current supply shock triggers a chain reaction, then a rate hike will be necessary. Upside risks to inflation may be one reason for a rate hike, but not the only one. He will closely monitor the impact of developments in the Middle East on financial and foreign exchange markets, the Japanese economy, and prices, assessing the likelihood of the baseline scenario while considering the timing and pace of adjusting policy rates. The central bank will implement monetary policy appropriately to ensure it does not fall behind the times. Sustainability, the relationship between risk and the economy, and prices are currently difficult to assess; therefore, maintaining the status quo is a prudent choice at this stage.
Editor's Summary
Kazuo Ueda's speech sent a clear signal of "wait and see": the situation in the Middle East is the biggest variable at present, and the Bank of Japan is neither in a hurry to raise interest rates nor abandon its tightening policy. The opposition of three committee members to maintaining the interest rate highlights that internal divisions have reached their most severe level during Ueda's tenure, and market expectations for a rate hike in June or July have not subsided. Ueda's repeated emphasis on the balance between "confirming risks" and "not falling behind the times" means that the Bank of Japan is walking a tightrope, highly dependent on data and prone to reversals. In the coming months, oil price trends, the yen exchange rate, and supply chain stability will be key factors in determining the pace of policy.
Following Kazuo Ueda's speech, the yen came under renewed pressure, with the USD/JPY pair rebounding to around 159.40, recovering most of the losses following the Bank of Japan's interest rate decision.
Frequently Asked Questions
Q1: Why does Kazuo Ueda believe that there is no need to raise interest rates immediately?
A: Ueda stated that the uncertainty surrounding the situation in the Middle East has reduced the likelihood of the expected economic and price outlook for Japan being realized. The central bank needs more time to confirm the actual impact of rising oil prices on businesses and households, and whether it will trigger widespread secondary effects (such as a spiral of rising wages and prices). He explicitly stated that he "hopes to take more time to confirm the impact of the Middle East situation," therefore maintaining the interest rate at 0.75% at this stage is an appropriate choice.
Q2: How did Ueda respond to the objections of three committee members?
A: Ueda stated that "the objections of the three committee members must be taken seriously," acknowledging significant internal divisions. However, he also emphasized that as governor, he needs to make decisions based on the overall baseline scenario and risk assessment. The rejection of Takada and Tamura's proposals regarding "CPI already met" and "consistent potential inflation" indicates that most committee members believe the conditions for an immediate interest rate hike have not yet been met.
Q3: What is the difference between "baseline inflation" and "overall inflation" as mentioned by Ueda?
A: Overall inflation includes volatile items such as energy and food, and is currently at a high level due to high oil prices. Underlying inflation (also known as core-core inflation or underlying inflation) eliminates these short-term fluctuations and better reflects the long-term trend of prices. Ueda points out that although overall inflation is slightly higher in the short term, underlying inflation is still slightly below 2%, so the central bank cannot simply raise interest rates just because overall inflation is rising.
Q4: What exactly does Ueda mean by "the chain reaction caused by the supply shock"?
A: This refers to the situation in the Middle East leading to disruptions in crude oil supply or soaring transportation costs, pushing up energy prices and subsequently affecting downstream industries such as manufacturing raw materials, logistics, and food processing, ultimately triggering a general price increase. If this chain reaction becomes apparent and persistent, even with a slowdown in economic growth, the Bank of Japan may be forced to raise interest rates to curb runaway inflation expectations.
Q5: How does Ueda assess the resilience and risks of the Japanese economy?
A: Ueda believes the Japanese economy is "moderately recovering" and "possesses a certain degree of resilience," primarily reflected in service sector consumption and corporate investment. However, he also warns of a potential "further economic slowdown," as rising oil prices will depress corporate profits and household real income, particularly impacting small and medium-sized enterprises and low-income groups. He specifically points out that economic growth may slow in fiscal year 2026, which is directly related to the duration and severity of the situation in the Middle East.
At 15:19 Beijing time, the USD/JPY exchange rate is currently at 159.40/41.
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