Bank of Japan chief stresses need to hit 2% inflation backed by wage gains

TOKYO: Bank of Japan Governor Kazuo Ueda said underlying inflation is accelerating toward the bank’s 2% target, stressing that price rises must be matched by solid wage gains.

The remarks came ahead of the central bank’s two-day policy meeting ending on Thursday, where the board is widely expected to keep interest rates steady at 0.75%.

Ueda told parliament that wages and prices are rising moderately in tandem as firms grow bolder in passing on higher raw material and labour costs.

“Underlying inflation is gradually accelerating towards our 2% target,” and is seen converging around 2% sometime from the latter half of fiscal 2026 through 2027, Ueda said on Tuesday.

“We will guide monetary policy appropriately so that Japan sustainably and stably achieve 2% inflation accompanied by wage gains,” he said. Ueda also repeated the central bank’s readiness to step into the Japanese government bond (JGB) market in exceptional cases of an abrupt spike in yields.

“Long-term rates are basically set by markets and fluctuate to some degree reflecting market views on the economic, price as well as fiscal and monetary policy outlook,” Ueda said.

“We will take nimble action in exceptional cases, where long-term interest rates rise sharply in a way deviating from normal market moves.”