Bank of Japan Governor Kazuo Ueda has stated that the central bank will closely monitor the ongoing volatility in financial markets “with extreme caution.” Ueda made these remarks during deliberations of the House of Representatives’ Committee on Financial Affairs, which took place while the Diet is out of session. The purpose of his attendance was to explain the BOJ’s response to the volatility in stock and currency markets in early August, following a decision by the central bank to raise its key interest rate from 0.0%-0.1% to around 0.25% during a monetary policy meeting on July 31.
During a press conference later that day, Ueda expressed optimism about future rate hikes. However, after the policy meeting, concerns about a recession in the US economy grew and led to significant fluctuations in market conditions. The Nikkei Stock Average experienced its largest-ever daily decline before recovering and marking its biggest gain on the following day. Additionally, there was a brief strengthening of yen against the dollar.
During deliberations, Norihiro Nakayama from Liberal Democratic Party asked for Ueda’s views on why stock prices had sharply declined and recent market turmoil. In response, Ueda acknowledged that the additional rate hike had affected yen trade and explained that it aimed to correct ongoing depreciation.
Hiromasa Nakagawa from LDP’s junior coalition partner Komeito raised concerns about insufficient dialogue between BOJ and markets. In reply, Ueda expressed their intention to manage monetary policy appropriately while maintaining careful communication with markets.
Regarding future policy operations, Ueda stated that their basic stance remains unchanged: they will adjust monetary easing while monitoring market movements’ impact on economy and prices. He also reiterated BOJ’s commitment to raising interest rates again if it increases chances of achieving their target inflation rate of 2%.