BOJ's Ueda warns of global uncertainty, keep markets guessing on next hike

Economic Outlook - Bank of Japan Governor Kazuo Ueda indicated that inflation is on track to meet the bank's target, but global uncertainties may hinder firms from increasing wages, leaving the decision on interest rate hikes open for October [1][2] - 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][3] Monetary Policy - Ueda stated that the future trajectory of the U.S. economy and its monetary policy could significantly influence Japan's economy and prices, emphasizing the need for close monitoring of the situation [3][5] - The Japanese yen weakened by 0.2% to 147.60 per U.S. dollar following Ueda's comments, as market participants interpreted them as reducing the likelihood of an interest rate hike in October [3][6] Market Reactions - Analysts noted that there was no clear indication from the BOJ's communication suggesting preparation for an October rate hike, with predictions leaning towards a more likely rate increase in December [4][6] - A split in the BOJ's board during the September meeting and calls for a near-term rate hike have led markets to price in over a 60% chance of a rate increase from 0.5% to 0.75% at the upcoming policy meeting on October 29-30 [6] Corporate Resilience - Ueda mentioned that Japan's economy has been managing the impact of U.S. tariffs effectively so far, with many companies benefiting from high profits accumulated previously [6]