BOJ's Ueda warns of global uncertainty, impact on wage outlook

Core Viewpoint - Bank of Japan Governor Kazuo Ueda indicated that inflation is on track to meet the bank's target, but global uncertainties may hinder wage increases, leaving the decision on interest rate hikes open for October [1][2]. Economic Outlook - Ueda highlighted various uncertainties affecting Japan's economic outlook, including signs of labor market weakness in the U.S. and the anticipated impact of higher U.S. tariffs on Japanese corporate profits [2]. - The future trajectory of the U.S. economy and its monetary policy could significantly influence Japan's economy and prices, necessitating close monitoring of the situation [3]. Market Reactions - Following Ueda's comments, the Japanese yen weakened by 0.2% to 147.60 per U.S. dollar, as market participants interpreted the remarks as reducing the likelihood of a near-term rate hike [3]. - Market players are closely observing Ueda's statements for indications on when the BOJ might resume its rate-hike cycle, which has been paused due to uncertainties surrounding the economic impact of U.S. tariffs [4]. Corporate Resilience - Ueda noted that Japan's economy is currently managing the effects of U.S. tariffs, with many companies benefiting from high profits accumulated previously [5]. - Underlying inflation, excluding one-off factors, is expected to accelerate towards the BOJ's target, countering earlier suggestions that it might briefly stall due to rising food costs [5]. Price and Wage Dynamics - Ueda mentioned that depending on firms' wage and price-setting behaviors, price increases could persist longer than anticipated, although prolonged food price rises might negatively impact consumption and inflation [6]. - The BOJ will carefully assess the likelihood of its baseline scenario materializing, along with both upside and downside risks, in its monetary policy decisions [6].