Kazuo Ueda: Difficulties in Formulating Monetary Policy, Different Risks Arising from Middle East Conflicts

Bank of Japan Governor Kazuo Ueda stated that the central bank is facing risks of high energy prices due to conflicts in the Middle East, which could also pose downward risks to the economy. Therefore, it is very difficult to formulate policies and provide a unified answer.

Ueda mentioned that considering factors such as the duration of the shocks and other economic conditions, the central bank will ultimately choose the most appropriate response measures to achieve a sustained inflation target of 2%. However, he emphasized that in the medium term, Japan's real interest rates remain very low, and the financial environment is very accommodative, which the central bank should take into account when making various decisions in the future.

Overnight swap rates indicate that the market expects only a 19% chance of the Bank of Japan raising interest rates this month, down from about 55% earlier this week