Bank of Japan Governor Kazuo Ueda delivered a measured address to business executives in Osaka on September 23, 2026, signaling that the central bank is under no immediate pressure to hike benchmark borrowing costs following its decision to hold the uncollateralized overnight call rate at 0.25%. Speaking in Japan's Kansai commercial hub, Ueda underscored that the policy board can afford ample time to observe overseas economic uncertainties and domestic price behavior.

The governor highlighted that recent financial market adjustments, particularly the dramatic rebound of the Japanese yen from multi-decade lows of 161 per US dollar toward the 140–143 range, had materially altered Japan's inflation backdrop. The yen's recovery has reduced import costs for energy, food, and industrial raw materials, effectively neutralizing the imminent risk of cost-push inflation overshooting the BOJ's sustainable 2% target.

Currency Stabilization Diminishes Immediate Inflation Overshoot Risk

With currency markets finding greater equilibrium and speculative carry trades largely unwound after the volatility spike in early August, Ueda emphasized that monetary policy decisions must prioritize global macroeconomic stability. Specifically, he pointed to heightened uncertainty surrounding the United States economy, where the Federal Reserve initiated its monetary easing cycle with an aggressive 50-basis-point interest rate cut.

Ueda noted that central bankers must evaluate whether the American economy is headed for a benign soft landing or a sharper slowdown that could dampen Japanese corporate profits and export orders. Because global market conditions remain sensitive to divergent monetary paths, the BOJ intends to conduct exhaustive data-dependent reviews at each upcoming Policy Board meeting rather than committing to a rigid rate hike calendar.

“We need to monitor market developments and overseas economic conditions with extremely high vigilance for the time being. Since the risk of inflation overshooting due to yen depreciation has subsided, we have enough time to scrutinize these factors thoroughly.”

Navigating the Fed's Easing Cycle and Domestic Wage Momentum

Domestically, the governor commended the solid momentum of Japanese wage negotiations, pointing out that annual 'shunto' wage increases had surpassed 5% for the first time in over three decades. However, he cautioned that corporate price-setting behavior for service sectors remains mixed, with small and medium-sized enterprises (SMEs) struggling to fully pass along elevated labor expenses to retail consumers.

Market participants in Tokyo responded to Ueda's remarks by paring bets on an interest rate hike at the BOJ's upcoming October 30–31 monetary policy meeting. Yields on benchmark 10-year Japanese government bonds dipped slightly, while institutional investors recalibrated expectations toward potential policy adjustments during the December 2026 or January 2027 policy reviews.

Sources

Bank of Japan Kazuo Ueda Monetary Policy Yen Interest Rates Japanese Economy Inflation