Bank of Japan Governor Kazuo Ueda told Prime Minister Sanae Takaichi on Tuesday that the central bank is moving carefully as it adjusts monetary support in an effort to bring inflation toward the two percent goal. His remarks followed their first one to one meeting since Takaichi took office last month.
Ueda said the two held open discussions on price trends, financial conditions and the path for monetary policy. He added that they also reviewed recent currency movements, stressing that it is preferable for exchange rates to remain stable and reflect Japan’s economic fundamentals.
The meeting drew intense scrutiny from investors who are watching for signals on when the BOJ might restart its rate increases. The yen recently touched a nine month low, prompting Japan’s finance minister to voice concern about swift and unpredictable swings in foreign exchange markets.
While Ueda has suggested that a rate rise could come as early as next month, Takaichi has pushed back against tightening too quickly. She has repeatedly urged the central bank to coordinate closely with the government as officials work to revive the economy.
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The BOJ raised its short term rate to zero point five percent in January after ending a long period of ultra easy policy last year. It has held steady since then while studying the impact of higher United States tariffs and the broader health of Japan’s economy.
Market expectations remain split. Many analysts believe the BOJ could lift rates to zero point seven five percent either in December or January, especially since inflation has remained above target for more than three years. Traders have also positioned for slower tightening under Takaichi, a leader viewed as supportive of generous public spending. Her stance has encouraged selling of the yen and Japanese government bonds.
Takaichi’s adviser warned against a near term rate increase after government figures on Monday showed the economy contracted in the third quarter due to soft consumption and falling exports. The data strengthened arguments from government circles that the recovery remains too fragile for higher borrowing costs.
The BOJ governor traditionally meets each new prime minister shortly after their inauguration. These sessions then continue every quarter to review economic and price developments. Officials inside the ruling party and financial markets will now watch closely to see whether Takaichi shifts her position if inflation remains stubborn and the yen stays under pressure.
