Bank of Japan raises rates to 31-year high; Kazuo Ueda: Does not rule out 50 basis points or consecutive rate hikes, but must guard against excessive tightening of financial conditions.

The Bank of Japan (BOJ) raised interest rates on Friday to their highest level in 31 years and signaled its readiness to keep pushing up borrowing costs, joining other major central banks in combating persistent inflation pressures stoked by soaring oil prices. But the widely expected rate hike failed to lift the yen, which instead weakened. Investors focused on two things: the lack of a clearly hawkish tone in the policy guidance, and the fact that two dovish dissenting board members advocated patience on rate hikes. The following are excerpts from BOJ Governor Kazuo Ueda's remarks at his post-meeting news conference: On a 50 basis point hike or consecutive rate hikes: "It depends on how the price situation unfolds. Various possibilities exist, and we should not rule out any options." "We are at a stage where we need to carefully examine various data. But that does not mean we can act slowly. We will carefully analyze the data and act promptly when necessary." "As for the pace of future rate hikes, we have no preset idea, such as once every three months. We will decide at each policy meeting how best to ensure underlying inflation stabilizes at 2%." On risk factors: "If the renewed upward momentum in energy costs persists, it could further increase wholesale inflation pressure and subsequently feed through to consumer inflation. This is something we need to be vigilant about." On financial conditions: "As we raise rates, financial conditions are becoming less accommodative... It is important to avoid excessively tightening financial conditions due to overly aggressive rate hikes, or triggering a sharp adjustment in asset prices." On uncertainty over the neutral rate: "It is difficult to precisely determine where the neutral rate is, so the terminal rate is also hard to pin down. It may be the case that as we adjust policy in a timely manner, we will know beforehand what level these rates are at." On inflation: "Until now, our short-term policy focus has been to push underlying inflation up from below 2%. Now, underlying inflation is approaching 2%. If the risk of underlying inflation rising above 2% materializes, it could have a negative impact on Japan's economy. It is crucial to stabilize underlying inflation at 2%. Our policy phase has changed."