BOJ’s Ueda Signals No Hike Next Week, Noting Time Is On His Side

(Bloomberg) -- Governor Kazuo Ueda said the Bank of Japan has time to consider its next policy steps, signalling the central bank won’t hike interest rates next week even after the yen fell to an almost three-month low.

“I believe we have enough time” for making a policy decision, Ueda told reporters in Washington after a meeting with his Group of 20 counterparts. 

“We need to look at the whole picture, and need to diligently examine impacts on Japan’s inflation from not only a weak yen but a view on the US economy behind it — which may be related to the US presidential election,” Ueda said.

The governor indicated he is keeping his guard high against risks from the US economy, even as he acknowledged that optimism seems spreading. Speaking Wednesday on the sidelines of IMF and World Bank annual meetings, Ueda said that he has been worried about the US economy for the last couple of months. 

Japan’s central bank is due to make a policy decision on Oct. 31, when investors will be watching for any clue for the timing of another rate hike. Ueda’s remarks are likely to cement the market’s expectations, with almost all BOJ watchers already expecting no policy shift this month.

Guidance for beyond the immediate upcoming gathering is crucial, as most of economists expect the next move in December or January, according to the latest Bloomberg survey.    

Ueda spoke after the yen slid to the lowest level since July 31 against the dollar earlier this week. Investors are watching to see whether the yen’s depreciation will bring forward the timing of a rate hike, by amplifying upside inflation risks. 

Sitting next to Ueda at the same press conference, Japan’s Finance Minister Katsunobu Kato reiterated his warning over the yen. He said he told G-20 counterparts that high volatility in the foreign exchange market warrants close attention. 

The yen was trading at around 151.8 as of 4:27 p.m. in New York, rising from the low of 153.19 it touched Wednesday.