According to Jin10, Bank of Japan Governor Kazuo Ueda said Monday that underlying inflation was “very close” to the central bank’s 2% target. He said anchoring underlying inflation near the target was becoming increasingly important. The remarks came ahead of a key policy meeting later this month, when the central bank will release its latest quarterly growth and inflation forecasts; markets will watch for clues about the timing of its next rate hike.

Ueda said the Middle East conflict had raised raw-material costs and pushed up inflation, while a tight labor market and a moderate economic recovery had added demand-driven price pressures. He also said strong global demand for artificial intelligence was boosting capital expenditure and exports, pushing up the prices of multiple goods. Raising interest rates at an appropriate pace, he said, could help prevent sharp swings in bond yields.