BoJ Governor Ueda Says Policymakers Will Examine Data to Determine if Underlying Inflation Is Stable

Bank of Japan Governor Kazuo Ueda said policymakers will examine incoming data to determine whether underlying inflation is stable, signaling that the central bank is not yet ready to commit to a further policy shift. The transmission channel runs through rate expectations: if underlying inflation is judged sustainably near 2%, the case for continued normalization strengthens, lifting yen-denominated short-term rate expectations and tending to support the yen against lower-yielding currencies. Japanese government bonds, particularly the front end and the 10-year benchmark, are the most directly exposed, as their yields reprice on shifts in the expected path of the policy rate. The USD/JPY pair is the most sensitive currency expression, given its sensitivity to rate differentials between the Fed and the BoJ. Traders will focus on the next national CPI release and the Tokyo core CPI reading for signs of whether services and wage-linked price pressures are broadening beyond energy and food.

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