Bank of Japan says inflation data key in deciding rate hikes, Nikkei reports

Bank of Japan Governor Kazuo Ueda revealed in an exclusive interview with Nikkei newspaper that the central bank will base whether to hike interest rates on critical economic indicators, particularly wage and inflation data.

Core consumer inflation in Japan's capital accelerated in November and stayed above the central bank's 2 per cent target, data showed on Friday, as price pressures broadened, keeping alive market expectations for a near-term interest rate hike.

Ueda emphasized that if the Japanese yen continues to depreciate after the country's inflation rate surpasses the annual 2 per cent target, it could pose a potential threat to the central bank's economic projections.

"We will adjust the degree of monetary easing at the appropriate time if we become confident or certain that the economy will move as forecasted by our economic and price outlook – particularly that the underlying inflation rises toward 2 per cent in the second half of the period of the outlook (fiscal 2024 to 2026)," Ueda said in the interview.

Ueda indicated that while economic data is progressing as expected, uncertainty surrounding U.S. economic policy, particularly regarding tariffs, remains a significant factor in their decision-making process.