Bank of Japan Governor Reiterates Risk of Inflation Overshoot, Stresses Importance of Anchoring 2% Target

Bank of Japan Governor Kazuo Ueda reiterated on Friday that underlying inflation risks exceeding the central bank's 2% target, and stressed the importance of anchoring price pressures near that target. The remarks come just ahead of the BOJ's late-October policy meeting, with markets closely watching for clues on the timing of the next rate hike. Speaking in a speech read by Deputy Governor Shinichi Uchida at a Shinkin Central Bank meeting, Ueda said factors such as Middle East tensions, AI-related demand, and exchange rate fluctuations could affect Japan's economy and prices, posing a risk that underlying inflation could overshoot the central bank's target. "The view of anchoring underlying inflation at around 2% is more important than ever," Ueda said, emphasizing the need to ensure that any overshoot does not harm the economy. The remarks are consistent with Ueda's comments earlier this month. The BOJ will hold its policy meeting on October 29 and 30, when the central bank will release new quarterly CKH HOLDINGS inflation forecasts that market participants will scrutinize for clues on the timing of the next rate hike. The BOJ raised its key rate to a 31-year high last month, while saying it has entered a phase of preventing underlying inflation from exceeding its target, increasing the likelihood of policy tightening. Currently, the market widely expects the BOJ to hold steady in October, with the December monetary policy meeting seen as the next key window for a rate hike.