By Megumi Fujikawa
TOKYO--Bank of Japan Gov. Kazuo Ueda has said he won't push for higher interest rates unless the economy is strong enough to take it, fueling speculation that the next hike won't come soon.
"We have no intention of forcefully raising the policy rate only to make room for future rate cuts when improvement in economic and price conditions is not anticipated," Ueda told a parliamentary committee Tuesday.
After Ueda denied that the central bank is trying to secure a policy buffer in case of an economic shock, the yen weakened to near 143.30 against the dollar from around 142.40 during Asian morning trading.
Many economists and market participants expect the central bank to hold its policy rate unchanged again at 0.5% this month as it remains unclear how trade negotiations between the U.S. and Japan will conclude.
Given "extremely high" uncertainty, the BOJ will make policy judgements without any preconceptions, while analyzing a variety of data and information and assessing its economic outlook, Ueda said.
Despite his cautiousness, the BOJ governor wasn't completely pessimistic about the economic outlook.
The negative effects of higher tariffs could affect Japanese companies' winter bonus payments and the course of next year's wage negotiations, though any impact is expected to be limited, Ueda said in parliament.
"Wage growth will likely continue, while the rise in overall consumer prices stemming from cost-push factors will subside. This should lead to a recovery in real wages and support consumption," he said.
At an event in Tokyo later in the day, Ueda also said that the mechanism in which wages and prices rise moderately in interaction with each other is unlikely to be interrupted by U.S. tariff fallout thanks to Japanese companies' solid corporate earnings and the resilience of household income.
"Although developments in trade policies since early spring have had a larger impact on Japan's economy than we had expected, the nascent developments toward achieving the 2% price stability target have continued to gain momentum," he added.
Barclays economists Naohiko Baba and Ryuichiro Hashimoto expect the BOJ to hold off on policy changes until January.
"We believe the BOJ is waiting for the overall tariff picture to take shape so that it can first assess the potential impact on corporate earnings and next year's annual spring wage negotiations and confirm that the tariffs will not derail the virtuous cycle between wages and inflation, then make its next rate hike," the economists said in a research note.
Write to Megumi Fujikawa at megumi.fujikawa@wsj.com
(END) Dow Jones Newswires
06-03-25 0552ET
