(Bloomberg) -- Bank of Japan Board Member Junko Nakagawa reaffirmed the bank's standing commitment to continue lifting its benchmark interest rate if conditions allow while also citing uncertainties related to trade, in a nuanced speech that avoided stoking market expectations for another hike.
If the outlook for the economy and inflation is realized, "the bank will accordingly continue to raise the policy interest rate and adjust the degree of monetary accommodation," Nakagawa said Thursday in a speech to local business leaders in Yamaguchi, western Japan.
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By rehashing the BOJ's standing policy stance, Nakagawa signaled her intention to avoid fueling market speculation for a hike ahead of the board's next meeting, which concludes on Sept. 19. Her remarks indicate there's at most a low chance of a move coming at that meeting as of now.
Speculation over a hike gained momentum after US Treasury Secretary Scott Bessent took the unusual step of asserting that the BOJ is behind the curve in its battle against inflation. Signs of steady economy activity and sticky price growth added to the expectations, helping to push up yields on Japan's benchmark 10-year bond to the highest level in 17 years earlier this week.
Nakagawa, a former chair of Nomura Asset Management, has never voted against a policy decision since joining the board in June 2021, and she is considered a neutral voice on the nine-member board. Still, she's telegraphed important policy moves in the past. In March 2024, days before the BOJ took the historic step of ending its negative rate regime and yield curve control mechanism, she clearly hinted at the chance of that development.
While BOJ Governor Kazuo Ueda has defended his gradual approach by citing the need to further monitor price trends, he made comments at the Federal Reserve conference in Jackson Hole, Wyoming that pointed to optimism, showing that the BOJ remains on the path toward more hikes.
"Wage growth is spreading from large enterprises to small and medium enterprises," Ueda said Saturday. "Barring a major negative demand shock, the labor market is expected to remain tight and continue to exert upward pressure on wages."
While citing a downside risk that business behavior could affect the wage-inflation cycle, Nakagawa also mentioned that a tight labor market will help inflation.