According to Yahoo News, Bank of Japan officials have noticed a discrepancy between what Governor Kazuo Ueda said in a recent interview and how traders interpreted his remarks. Most of Ueda's comments in the Yomiuri newspaper interview were consistent with his routine remarks, indicating little change in the view among officials that they'll need to weigh both upside and downside risks in deciding whether to adjust policies. However, traders seized on Ueda's reference to a potential end to negative rates if certain conditions are met, and within a day, pricing in the bond market indicated expectations of a hike by January. Economists see April as a more likely time frame.
Ueda, a former economics professor, mentioned the possibility of having enough data to discern a virtuous wage-inflation cycle by the end of this year, but this remark was a general statement rather than a policy signal. Officials also acknowledge that inflation remains strong, requiring them to closely look at upside risks for now. This indicates the possibility of an upward revision in a quarterly inflation outlook in October. All economists surveyed by Bloomberg expect no policy change when the Bank of Japan concludes its two-day policy meeting next Friday.
