By Leika Kihara
TOKYO, Oct 6 (Reuters) – Bank of Japan Governor Kazuo Ueda said on Tuesday it was becoming more important to anchor underlying inflation around the central bank’s 2% target, signalling readiness to keep raising interest rates to blunt the risk of too-high inflation.
Economic and price developments were moving in line with the BOJ’s baseline scenario, with the economy recovering moderately and long-term inflation expectations increasing, Ueda said in a speech to an annual meeting of securities firms.
He also warned of the risk of underlying inflation overshooting the BOJ’s target due to price pressures from the US-Israeli war on Iran, strong AI-related demand and the weak yen.
“Financial conditions remain accommodative and continue to underpin economic activity” even after last month’s rate hike, Ueda said, adding that the central bank will continue to raise borrowing costs to adjust the level of monetary support.
“It has become more important than before to ensure underlying inflation becomes anchored around 2%” so that the risk of an inflation overshoot does not materialise and damage the economy, he added.
(Reporting by Leika Kihara; Editing by Christopher Cushing and Thomas Derpinghaus)
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