The central bank raised interest rates in July as the economy, inflation moved mostly in line with forecast

Bank of Japan (BoJ) Governor Kazuo Ueda told the Japanese parliament on Friday, “The BoJ raised interest rates in July as the economy and inflation moved largely as forecast.”

Additional quotes

No change in stance on monetary easing adjustment if economy, inflation moves in line with forecast.

The BoJ’s recent policy decisions have been appropriate.

Showing the future policy path could cause unnecessary speculation.

The increase in import prices continued more than expected.

The weakening of the yen could affect the BoJ’s price forecasts.

Currency movements affect the economy through various channels.

Currency movements at times could affect the economy as well as risks to the economic forecast.

Currency movements could affect the BoJ’s median forecasts, in which case we will decide what the appropriate policy response would be to such a change in forecasts.

Currency volatility could also create upside and downside risks to our forecasts, in which case we will review the degree of risk to determine whether a policy response is necessary.

Hard to promise when and in what form we can reveal Japan’s estimated neutral rate.

If we can sufficiently narrow the estimated neutral rate, we must disclose our findings to the public, the media, and the markets.

Forex could affect policy depending on the degree of overshooting or undershooting of risks in the price outlook.

It will narrow the expected neutral interest rate range while monitoring how higher interest rates affect the economy.

The July rate hike was done on accommodative terms.

We do not intend to remove the BoJ’s ETF assets, but when we do, we will aim to avoid market disruption and sell at appropriate prices.

In July, the MPM decided that the degree of adjustment of monetary easing is appropriate from the point of view of stable and sustainable achievement of the target price.

Real rates are likely to remain negative, easy financial conditions will continue to support the economy.

Market reaction

USD/JPY extends losses to challenge 145.50 in reaction to Governor Ueda’s comments. The pair is down 0.44% on the day.