Shigeta Kazuo: The Bank of Japan may continue to raise interest rates, focusing on the prospect of a "soft landing" for the US economy.

The Bank of Japan on Friday kept its interest rate unchanged at 0.25%, in line with market expectations. The Bank of Japan also raised its assessment of consumption, indicating that it believes a strong economic recovery will allow it to raise rates again in the coming months. Bank of Japan Governor Haruhiko Kuroda held a press conference after the policy meeting. He emphasized that the Bank of Japan will closely monitor economic, price, and financial market developments when deciding on monetary policy. If economic and inflation trends meet expectations, the Bank of Japan will raise rates. Kuroda also stated that the outlook for the global economy is highly uncertain and it is particularly important to monitor whether the US economy will experience a soft landing. The following is a summary of Kuroda's remarks: Interest rates "Our decision on monetary policy will depend on the economic, price, and financial developments at the time. Japan's real interest rates remain extremely low. If our economic and price forecasts materialize, we will raise rates and adjust the level of monetary support accordingly." Economic outlook "The outlook for the global economy is highly uncertain. The market remains unstable. Currently, we need to carefully observe how these situations develop." Price target "We will carefully study how these risks will affect our outlook and the likelihood of achieving our price target." Exchange rate "As for recent exchange rate movements, the risk of imported price increases leading to excessive inflation has significantly decreased. Therefore, we still have some time to decide on policy." Nominal wages "Wages must rise in a way that is consistent with achieving our sustainable price target. Nominal wages are increasing, reflecting strong wage negotiations that are pushing up incomes. Bonuses are also increasing. We expect wages to continue to rise." Has the market stabilized? "It is difficult to say how long it will take to determine (whether the market has stabilized). We do not have a specific deadline. But one factor we hope to focus on is whether the US economy will achieve a soft landing, or whether the slowdown will become more severe." Wage negotiations "We hope that wage negotiations next year will make good progress. But we need to carefully examine how developments in the global economy will affect business activities and profits." Wage increases across the board "The range of wage increases is widening, but some small companies are struggling. We hope to carefully study whether the range of wage increases will expand." Japanese economy "From consumption and other data, it appears that the Japanese economy is on track, as per our forecasts. Based on domestic data, we may even raise our inflation expectations. However, the uncertainty of the US economic outlook has intensified. This has offset some of our optimism regarding inflation expectations." Neutral interest rate "So far, we have not narrowed down our estimate of Japan's neutral interest rate level... We need to deepen our analysis, including the impact of the two rate hikes this year." "When we talk about the lower limit of our estimate of Japan's neutral interest rate, we do not have a specific level in mind. When we approach that level, we may not necessarily slow down. But we will pay special attention to the impact of past rate hikes." August inflation "In August, inflation was slightly stronger than expected. Part of the reason is the weak yen's impact. Including other one-time factors, a considerable portion of these factors will dissipate. On the other hand, as wages rise, service prices are also increasing, in line with our forecasts. This is putting upward pressure on inflation. We need to consider all these factors comprehensively. We also need to consider the uncertainty abroad and market trends." Key factors in policy making "One is whether wages will steadily rise, including the impact of expected minimum wage increases. Another factor is whether companies will continue to pass on rising (labor) costs to service prices. The results of next year's wage negotiations are crucial, as well as whether consumption will remain strong." Potential risks of raising rates "In general, central banks set monetary policy to achieve economic and price stability, so the monetary policy cycles of different countries may differ. It is clear that the US has entered a rate-cutting cycle. If this leads to a soft landing for the US economy, the negative impact on the Japanese economy will not be significant. But if the US economy faces a more severe adjustment, we may need to change that viewpoint."