Bank of Japan Governor signals intention to proceed with rate hikes

Bank of Japan Governor Kazuo Ueda indicated the intention to raise the interest rate if the economic environment improves in line with the regulator's forecasts.

According to Ueda, growing uncertainty, especially that related to trade policy, prompted the Bank of Japan to revise its expectations of GDP expansion. At the May meeting, the central bank officials halved their economic recovery projections for the current fiscal year. Additionally, the timing of the consumer price index reaching the 2% target was pushed back by a year. However, the governor says Japan's core inflation is now closer to the target than a few years ago.

The Bank of Japan is expected to hold its rates steady at the next meeting on June 17. The regulator will also update plans to reduce its presence in the government bond market by cutting back on planned purchases, Bloomberg reports.  

Ko Nakayama, chief economist at Okasan Securities and a former Japanese central bank official, expects the next hike in borrowing costs in September at the earliest.