Image Credits: Reuters
In a recent address to the House of Representatives’ Committee on Financial Affairs, Bank of Japan (BOJ) Governor Kazuo Ueda underscored the central bank’s commitment to closely monitor the current volatility in financial markets. His remarks came amid a period of significant market turbulence, following the BOJ’s decision to raise its key interest rate from the near-zero range of 0.0%-0.1% to approximately 0.25% at the end of July.
Ueda’s comments were delivered during a session of the Diet, which is currently out of session, to clarify the BOJ’s response to recent market fluctuations. The policy adjustment led to heightened volatility in both the stock and currency markets, with the Nikkei Stock Average witnessing its largest-ever single-day drop, followed by a notable recovery. Concurrently, the yen experienced fluctuations, briefly strengthening to the ¥141 range against the dollar before stabilizing.
During the deliberations, Ueda addressed concerns raised by Norihiro Nakayama of the Liberal Democratic Party (LDP) about the reasons behind the drastic fall in stock prices. Ueda attributed the market correction to the BOJ’s policy shift, which had an impact on yen trading dynamics.
Additionally, Hiromasa Nakagawa of Komeito, a junior coalition partner of the LDP, questioned whether the BOJ had sufficiently communicated its policy intentions to the market. Ueda responded affirmatively, emphasizing the BOJ’s commitment to effective communication while managing monetary policy.
Looking ahead, Ueda reaffirmed the BOJ’s strategy of adjusting monetary easing measures in response to market conditions and their effects on the economy and inflation. He hinted at potential future rate hikes, contingent on their ability to bolster the likelihood of achieving the BOJ’s 2% inflation target. The central bank’s forward stance reflects its ongoing efforts to balance market stability with its inflation objectives amid a complex economic landscape.