BoJ’s Ueda: Central bank must take into account Japan's low real rates in setting policy
Ni Lallalit Srijandorn
Na-update: 17 Apr 2026
Sikat na Artikulo
Bank of Japan (BoJ) Governor Kazuo Ueda said that a decision on how soon to raise interest rates must take into account the fact that the nation's real interest rate is low, Reuters reported on Friday.
Bank of Japan (BoJ) Governor Kazuo Ueda said that a decision on how soon to raise interest rates must take into account the fact that the nation's real interest rate is low, Reuters reported on Friday.
Ueda added that Japan is facing rising inflation from a "negative supply shock," which is more difficult to rein in with monetary policy than inflation driven by strong demand. He chose not to comment on market expectations regarding a potential interest rate hike in the April policy meeting.
Key quotes
Having said that, I would note that Japan's real interest rate is currently low up to the medium-term zone of the yield curve.
We must also take into account the fact Japan's financial environment is accommodative.
If the economy slows, that would put downward pressure on prices. On the other hand, rising crude oil prices would put upward pressure underlying inflation through inflation expectations.
Taken together, we will make a decision at each policy meeting using data and information available at the time.
Market reaction
As of writing, the USD/JPY pair is up 0.15% on the day at 159.40.
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
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