The Governor of the Bank of Japan warns against rushing to raise interest rates.

Japanese Bank Governor Kazuo Ueda noted in his speech on Wednesday morning that the Japanese economy is approaching a sustainable inflation rate of 2%, indicating the possibility of an interest rate hike in 2025.

However, Ueda pointed out that uncertainties regarding global economic trends and domestic wage negotiations are key factors in the policy decisions made by the Bank of Japan.

The governor emphasized that achieving a stable inflation rate depends on wage growth and the fair distribution of corporate profits. While consumption is improving due to rising wages, excessive monetary easing poses risks to inflation, necessitating gradual adjustments.

The key points from Ueda's speech included:

• Japan is making progress toward achieving a stable inflation rate of 2% alongside wage growth.
• Inflation has become more sustainable as prices rise moderately due to increased wages.
• The Bank of Japan will maintain its accommodative monetary policy in the near term but will raise interest rates if economic conditions improve further.
• Prolonged excessive monetary easing may increase inflation risks.
• Developments in economic activity, prices, and financial conditions, as well as wage negotiations, will influence interest rate movements.
• The Bank of Japan is monitoring the impact of U.S. economic policies and domestic uncertainties on Japan's economy.
• Consumption is improving due to labor shortages and rising wages.
• Corporate profits from large companies must be distributed to smaller businesses and households to achieve sustainable inflation.
• The Bank of Japan expects the Japanese economy to achieve a stable inflation rate of 2% by 2025, supported by wage increases and a stronger economic cycle.
• Prices are rising moderately, reflecting wage growth, with close monitoring of wage increases by small and medium-sized enterprises.