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

Core Viewpoint - The Bank of Japan (BOJ) is on track to achieve its inflation target, but uncertainties in the global economy 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 potential impact of higher U.S. tariffs on Japanese corporate profits [2][6]. - The BOJ is prepared to raise interest rates if economic conditions align with forecasts, but external factors may lead firms to prioritize cost-cutting over wage increases [2][6]. Market Reaction - Following Ueda's comments, the Japanese yen weakened by 0.3% to 147.72 per U.S. dollar, as market participants interpreted the remarks as reducing the likelihood of an October rate hike [3]. - Analysts suggest that a rate hike in December is now more probable than in October due to the lack of clear signals for an immediate increase [3]. Impact of U.S. Economic Conditions - The ongoing U.S. government shutdown is expected to delay the release of key economic data, complicating the BOJ's decision-making process regarding interest rates [4]. - Ueda acknowledged that while the delay in U.S. data is a significant issue, the BOJ will analyze other available data to inform its decisions [4]. Future Considerations - Ueda plans to gather insights from discussions with policymakers and bankers during the upcoming IMF meeting, indicating that the global economic outlook will influence the BOJ's decision on potential rate hikes [5]. - The BOJ is aware of the significant uncertainties regarding how tariffs may impact global, U.S., and Japanese economies, but it does not need to wait for all data to assess risks [6][7].