Bank of Japan Governor Kazuo Ueda expressed confidence in hitting inflation targets but warned of global uncertainties affecting wage increases. He hinted at a possible rate hike in October but acknowledged the impact of U.S. tariffs on Japanese corporate profits, causing market speculation on the timing of a rate increase.

Ueda emphasized the importance of scrutinizing economic data amidst a U.S. government shutdown, potentially delaying key information for the Bank of Japan’s decision-making process. He plans to gather insights at the IMF meeting in Washington, suggesting that global economic outlook could influence future rate decisions.

Market players eagerly anticipate clues from Ueda’s remarks on a potential rate-hike cycle resumption, following a pause due to uncertainty around U.S. tariffs. Speculation on a rate increase in October has increased, with over a 60% chance of a hike to 0.75% from 0.5% at the next policy meeting on October 29-30.

Ueda highlighted Japan’s economic resilience against U.S. tariffs, noting many companies have financial buffers from past profits. He expects underlying inflation to align with the BOJ’s target, anticipating an acceleration driven by labor shortages and rising long-term inflation expectations, amid potential food cost pressures.

Reiterating caution on rate hikes, Ueda emphasized the need for price rises to stem from wage gains and strong domestic demand to ensure sustainable inflation. Despite consumer inflation exceeding 2% for over three years, the BOJ remains vigilant to prevent inflation risks from outpacing policy responses.

Read more at Yahoo Finance: BOJ’s Ueda warns of global uncertainty, keeps markets guessing on next hike