By playing Kihara
Osaka (Reuters) – Japan governor Kazuo Ueda said that inflation was on the right track to achieve the bank’s objective durably, but warned against global uncertainties that could discourage businesses from the increase in wages, leaving a free hand on the advisability of increasing interest rates in October.
UEDA has reiterated the central bank determination to continue to increase interest rates that are still low if the economy and prices are transformed according to its forecasts.
But he said that there were various uncertainties surrounding Japan’s economic prospects, such as the growing signs of low labor market in the United States and the expected impact of higher American rates on the profits of Japanese companies.
“If uncertainty about economies abroad and trade policies remains high, companies can put a strong emphasis on cost reduction and weaken their efforts to reflect wages’ prices increase on Friday in a speech to business leaders in the wesa city of Japan in Osaka.
“The future course of the American economy and the conduct of monetary policy could considerably affect the economy and prices of Japan,” said Ueda. “So we will continue to watch the situation closely,” he added.
The Japanese yen weakened 0.2% to 147.60 per US dollar after Ueda comments, because some market players interpreted them as reducing the probability of a short -term rates.
The market players looked closely at all the indices on the speed with which the BOJ will resume an increase in rates which has been interrupted due to the uncertainty on the economic benefits of American prices.
A Hawkish board of directors separated from the BOJ meeting in September and provides for an increase in short -term rates of a dominant police decision -maker led the markets to a price in more than a 60% chance that the bank will increase rates to 0.75% against 0.5% at its next political meeting from October 29 to 30.
Ueda has said that the Japanese economy has so far been the blow of American prices, with many companies armed with high profitable profits accumulated in the past.
He also declared that underlying inflation, or the trend at a wide price excluding occasional factors, will accelerate towards the objective of the BOJ – by eliminating the previous reference.
“Depending on the behavior of wages and corporate prices, the price increases may persist longer than expected,” said Ueda. But he added that prolonged food increases could also affect consumption and lower inflation.
“We will carefully examine the probability that our reference scenario materializes, as well as rising and downward risks” to decide on monetary policy, said Ueda.
