Bank of Japan Governor Kuroda: If economic and inflation forecasts are realized, we will continue to raise interest rates in the future.

The Bank of Japan kept interest rates unchanged on Friday but decided to start selling its holdings of risky assets, taking another step towards phasing out its massive stimulus program. Bank of Japan Policy Board members Satoshi Takada and Naoki Tamura opposed keeping short-term rates at 0.5% and proposed raising them by 25 basis points to 0.75%, citing upward risks to inflation. Bank of Japan Governor Haruhiko Kuroda subsequently held a press conference on monetary policy, downplaying the risk of food inflation but remaining vigilant about tariff risks. He also emphasized that if economic and inflation forecasts are met, the Bank of Japan will continue raising rates. The following are excerpts from Haruhiko Kuroda's comments at the press conference: Food inflation expected to gradually fade Kuroda stated, "Today's CPI data basically meets our expectations... We expect food inflation to gradually fade and not have a significant impact on core inflation. There is a risk that sustained increases in food prices could affect inflation expectations and gradually push up core inflation. On the other hand, there is also a risk that high food prices could suppress consumption of other goods, thereby dampening overall consumption. Both of these situations are not our base expectation, but we need to be aware of these risks." Japanese economy still resilient Kuroda said, "In the current quarter, there has been a slight decline in exports after a rush to stock up on goods. Manufacturers' profits have decreased somewhat. However, overall, exports remain stable, and corporate profits are still high. Capital expenditure is in good shape. Consumption is somewhat sluggish, but still resilient. So far, we have not seen significant impacts of U.S. tariffs on the Japanese economy." Inflation rate expected to approach 2% Kuroda stated, "I personally believe that core inflation is still slightly below 2%, but it is approaching that level. As for the views of Policy Board member Naoki Tamura, pressures from rising prices are certainly one of the risks. However, given that the impact of U.S. tariffs is likely to intensify, we also need to pay attention to downside risks in the economy and prices." Limited impact of U.S. tariffs Kuroda said, "Since July, there have been signs of weakness in U.S. employment and consumption. However, at present, the impact of tariff costs on inflation seems relatively mild. The Fed's rate cuts may support the U.S. economy. As for the Japanese economy, the impact of tariffs is eroding manufacturers' profits. But so far, it has not had a significant impact on the overall Japanese economy, including employment, wages, and capital expenditure. We expect underlying inflation to continue moving towards the 2% target." Maintaining economic forecasts unchanged, but outlook still uncertain Kuroda said, "We do not need to change the benchmark scenario outlined in the Quarterly Outlook Report from July. The Japanese economy may face pressure from tariffs, but is expected to withstand this impact. We expect core inflation to remain stable for a period before gradually rising to 2%." Kuroda also said, "However, there is still considerable uncertainty in the outlook." Considering further rate hikes Kuroda said, "Real interest rates are still at extremely low levels. If our economic and price forecasts are realized, we will continue to raise rates based on improvements in economic and price conditions." Monitoring the impact of overseas tariffs Kuroda stated, "There is considerable uncertainty in the impact of tariff policies of various countries. Therefore, we will carefully examine domestic and international economic conditions and market developments without assuming any preconditions."