Boj’s Ueda warns of global uncertainty, keep markets gamble during the next walk

By Leika Kihara

Osaka (Reuters) -Bank of the Japanese governor Kazuo Ueda said that inflation was on his way to hit the target of the bank, but warned of global uncertainties that companies can discourage wages, giving him a free hand to increase interest rates in October.

Ueda repeated the determination of the Central Bank to continue to increase silent interest rates if the economy and the prices are in accordance with its predictions.

But he said there were several uncertainties about the economic prospects of Japan, such as growing signs of weakness of the labor market in the United States and the expected impact of higher American rates on Japanese business gains.

“If uncertainty about foreign economies and trade policy remains high, companies can put a stronger emphasis on cost -saving and can reflect their efforts to reflect the price increases,” Ueda said in a speech for managers in the western city of Osaka on the western Japanese city of Osaka.

“The future course of the US economy and the behavior of monetary policy can significantly influence the Japanese economy and prices,” said Ueda. “We will therefore continue to follow the situation closely,” he added.

The Japanese yen weakened 0.2% to 147.60 per US dollar after the comments from Ueda, because some market players interpreted them as reducing the chance of an interest rise of October.

“There was no clear change in the communication of the Boj that would suggest that it was trying to lay the foundation for an increase in October,” says Shotaro Mori, senior economist at SBI Shinsei Bank.

“If the tariff effect were to be intensified from now on, it would be important to look at hard data on the economic growth of Japanese third quarter and business gains,” he said, predictively that an increase in December was now more likely than October.

The comments came after the closure of an American government that started on Wednesday, which could delay the release of a large part of the economic data and could make it more difficult for the BOJ’s rate decision.

Market players have closely monitored Ueda’s comments for all instructions on how quickly the BoJ will resume a speed cycle that has been paused because of uncertainty about the economic fall-out of American rates.

A Hawkish Board split during the September meeting of the BoJ and calls for an increase in speed in the short term due to a DOVISH policy maker, has led the markets to the price of more than 60% that the bank will increase rates to 0.75% of 0.5% during the next policy meeting on 29-30 October.

Ueda said that the Japanese economy has so far passed the hit of American rates, with many companies armed with buffers of high profit that have been collected in the past.

He also said that the underlying inflation, or the broad price trend that will speed up one -off factors exclusively to the purpose of the BoJ – the removal of earlier reference will block it briefly in a nod to recent increasing pressure on rising food costs.

“Given the intensification of labor shortages and rising medium to long -term inflation expectations, the underlying inflation will probably speed up with actual inflation,” said Ueda.

The comment compared to language in Boj’s policy statement in September, which said underlying inflation “will be slow because of the delay in growth before he gradually increases.”

De Boj has justified to slowly go to the interest rate increases in the appearance that underlies inflation, or price increases driven by the domestic demand as measured by different indicators, remains short of the purpose of 2%.

“Depending on the wage and price amount of companies, it is possible that price increases will last longer than expected,” said Ueda. But he added that long -term increases in the food price can also harm consumption and reduce inflation.

“We will carefully investigate the chance that our baseline scenario will materialize, as well as both upward and downward risks” when deciding on monetary policy, Ueda said.

De BoJ ended a huge, decade -long stimulation program last year and increased the percentages to 0.5% in January, according to the view that Japan was about to achieve his 2% inflation objective.

Although consumer inflation has been more than three% for more than three years, UEDA has emphasized the need to run carefully when raising the loan costs to ensure that the price increases are powered by wage profit and a robust domestic demand.

(Reporting by Leika Kihara; Additional reporting by Kentaro Sugiyama and Makiko Yamazaki in Tokyo, Ankur Banerjee in Singapore; Edit by Muralikumar Anantharaman and Sam Holmes)