The Bank of Japan’s governor says underlying inflation is close to its 2% goal

Bank of Japan Governor Kazuo Ueda said underlying inflation is “quite close” to the central bank’s 2 per cent target³. He linked part of that pressure to demand from abroad, saying strong global AI demand is adding to it^5,7. The Business Times reported the same remarks from Tokyo².

Ueda made the comments in Parliament, where he appeared alongside Prime Minister Takaichi, and said underlying inflation is rising very close to the bank’s target⁴. Takaichi, for her part, denied that she is driving a weak yen and high rates⁴. Traders Union reported that the remarks came ahead of the policy meeting on 30 October⁶.

Why it matters to investors

The language matters more than the data because the Bank of Japan has spent years describing inflation as not yet durable. “Quite close” is a shift in that framing³, and it arrives with the bank’s own meeting days away⁶. The yen barely moved on it: Reuters reported the US dollar was flat at 158.09 yen as Ueda spoke, with the dollar steady overall and the euro weaker after French protests turned violent¹.

That muted currency reaction is itself the signal. A governor saying the target is nearly met, with no move in the exchange rate, suggests the market has already priced a path of gradual tightening and is waiting for the decision rather than the commentary^1,6.

For foreign investors the chain runs through funding costs. A Japanese policy rate that is genuinely converging on the inflation target changes the arithmetic of borrowing in yen to buy assets elsewhere, and the Business Times framed Ueda’s remarks as the central bank’s clearest statement yet that the goal is within reach². Forex Factory reported the same quotation, with the governor tying the pressure to strong global AI demand⁷.

What to watch

Domestic equities are reading the same AI demand story in two directions. The Mainichi reported that Tokyo stocks were mixed, with gains from buybacks set against concerns over the financing burden carried by companies investing in AI infrastructure, and with the Bank of Japan meeting scheduled for next week⁸. Ueda is citing AI demand as inflationary⁵, while Tokyo investors are treating the same spending as a credit question⁸.

The meeting on 30 October is the next scheduled test⁶. The things to check are whether the bank’s own statement repeats Ueda’s phrasing about underlying inflation^2,4, whether the yen holds near the level it reached on Monday¹, and whether Takaichi’s government keeps its distance from the rate debate after denying it is steering either the currency or the policy path⁴.