Bank of Japan Governor Kazuo Ueda urged Japanese credit unions to undertake proper management of interest rate risks, citing the banking crisis that shook the US financial system earlier this year as well as high uncertainties related to the domestic economy.
(Bloomberg) — Bank of Japan Governor Kazuo Ueda urged Japanese credit unions to undertake proper management of interest rate risks, citing the banking crisis that shook the US financial system earlier this year as well as high uncertainties related to the domestic economy.
“The importance of risk management for interest rates is rising even more given extremely high uncertainties over the economy and inflation in our country,” Ueda said in a speech at a national credit union conference in Tokyo Friday. “I want you to continue with appropriate risk management.”
The comments are likely to help keep market watchers speculating over a potential policy shift. Most BOJ watchers expect the bank to put an end to its negative interest rate policy next year. In line with past speeches by governors at the conference, Ueda didn’t drop any clear hints regarding the chances of a policy change, largely repeating the latest policy statement.
“The BOJ will keep monetary easing patiently to achieve its 2% inflation target in a stable and sustainable manner,” Ueda said.
Ueda was speaking shortly after the BOJ published its latest Financial System Report, in which it said Japan’s financial system has been sound and resilient even in the wake of the disruptions seen in the US and Europe in March.
At the same time, “vigilance against tail risks continues to be warranted. The period of stress may be prolonged further with continuing monetary tightening by central banks and the resultant concerns about a slowdown in foreign economies,” the BOJ said in the report.
Earlier Friday, Japan’s inflation data were a tad stronger than economists were predicting, with price increases staying above the BOJ’s 2% goal for an 18th month. The data backed analysts’ views that the bank will raise its price projections in a quarterly economic report to be released on Oct. 31. That’s also when it delivers its next policy decision.
Ueda reiterated his view that while the pace of inflation may slow a bit in the short term, it’s expected to gradually speed up in the longer term supported by wage growth and inflation expectations.
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