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Morning sessions saw Ueda adopt a hawkish tone, signaling a potential for further interest rate hikes should inflation trends meet expectations. Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management, noted that Ueda’s initial remarks reinforced the possibility of tighter monetary policy if inflationary pressures persist.
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.
The yen's depreciation has had significant implications for Japan's economy, increasing import costs and contributing to rising consumer prices. This has put additional strain on households and businesses, prompting the BOJ to take a more active stance.
BOJ Governor Kazuo Ueda highlighted that the economy has "recovered moderately" and emphasized the importance of transitioning towards normal monetary policies, the decision was influenced by sustained inflation exceeding the BOJ's 2% target and significant wage hikes following annual union negotiations.