Ueda says Bank of Japan will weigh a rate hike at every meeting, the next included

The governor repeated a line he has used since September, as core inflation has risen back above 2% and the policy rate stands at 1.25%.

Bank of Japan governor Kazuo Ueda said the central bank will weigh a rate rise at every policy meeting, the coming one included. He added that the Bank still has work to do on rates because the policy rate remains below the neutral level, the setting that neither stimulates nor restrains the economy. It is the data-dependent language he has used since the September hike, and it confirms the base case rather than moving it.

That hike took the overnight call rate to 1.25%, a quarter-point rise that followed one in June. Ueda said afterwards that the Bank can act again without a long wait, though he also warned that large or repeated increases risk overshooting. He has said anchoring inflation near 2% is becoming more important.

The data give him reason to keep the option open. Core consumer prices rose 2.1% in September from a year earlier, in line with forecasts and up from 1.7% in August. Tokyo core-core inflation, which strips out fresh food and energy, rose 3.0% against a consensus of 2.5%. BOJ official Koeda has said rate adjustments should be timely as price risks tilt higher, and traders had expected a hold at 1.25% at the October meeting, with attention on signals for December.

Markets have settled on December as the likely next move, and Ueda's own admission that the rate sits below neutral keeps it in focus. Takata's dissent points the same way.

The same expectation is already pushing Japanese long-term yields towards multi-decade highs. The yen-funded carry trade, in which investors borrow cheaply in yen to buy higher-yielding assets elsewhere, remains the main channel into US rate markets, so a Japanese tightening cycle that the market already expects matters beyond Tokyo.