Ueda says the Bank of Japan cannot tolerate inflation rising further above its target

Bank of Japan Governor Kazuo Ueda said on Friday that he cannot tolerate underlying inflation rising further above 2%, Bloomberg reported, remarks it said reinforced expectations for further tightening⁴. The Business Times carried the same quotation, with Ueda saying he cannot tolerate underlying inflation rising further above 2 per cent⁶. The Wall Street Journal reported him saying the bank must ensure underlying inflation does not go above 2%, speaking at a news conference in Bangkok³.

Reuters reported Ueda saying the central bank will focus on anchoring underlying inflation around its 2% target and vowing to keep raising rates¹. Channel NewsAsia reported him reiterating the risks of underlying inflation overshooting the 2 per cent anchor⁵. Nikkei Asia reported him saying underlying inflation is already quite close to the target⁷. Morningstar described the tone at the news conference as continuing to be hawkish⁸.

What the market now expects

Brokerages expect the next Bank of Japan rate increase in December, with further tightening in 2027, Reuters reported². The same report noted that the bank raised interest rates to a 31-year high in September and signalled that further tightening could follow as it shifts its focus².

Japanese government bond yields have responded. Trading Economics reported the Japanese ten-year yield rising as the Bank of Japan outlook was weighed, and said Ueda’s comments underscored a measured approach as the bank continues to move away from its previous yield curve control framework⁹.

Why it matters to investors

Japanese policy sets the cost of the cheapest funding currency in the system, so the pace of tightening bears on the carry trade and on the long end of global bond markets. Simply Wall St noted that if the Bank of Japan leans tighter for longer, the winners and losers across Japanese financials could look very different, and put Mitsubishi UFJ in focus¹⁰.

The sources in this pack are consistent on the direction of travel and differ mainly in emphasis. Bloomberg and The Business Times lead on the refusal to tolerate a further overshoot^4,6, the Wall Street Journal and Channel NewsAsia on the obligation to hold the line at the target^3,5, and Nikkei Asia on how close underlying inflation already is to it⁷. The timing question that remains, on Reuters’ account, is whether the next move lands in December as brokerages expect².