BOJ Governor Ueda signaled a commitment to gradual monetary tightening, emphasizing data-dependent adjustments to interest rates and policy normalization. The forward guidance points to rate hikes being sustained as long as inflation and wage growth trends support a shift away from ultra-loose policy, with the key transmission channel being yield curve control relaxation and JGB supply absorption. Japanese government bond markets and domestic bank balance sheets are most exposed, given their sensitivity to rising yields and narrowing interest rate spreads. Traders will focus on the upcoming Tokyo CPI report and the BOJ’s quarterly Summary of Opinions for signs of consensus around faster normalization.
Bank of Japan Governor Ueda said the BOJ will keep increasing interest rates while adjusting the level of monetary support according to economic, price, and financial conditions.
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