Ueda Speech: BoJ Governor discusses policy outlook after maintaining interest rate

Bank of Japan (BoJ) Governor Kazuo Ueda is holding a press conference to explain the reasons behind maintaining the key interest rate at 0.5% on Tuesday.  

The Japanese Yen wavers in a familiar range against the US Dollar, with USD/JPY trading 0.08% higher on the day near 144.80, as of writing

BoJ press conference key highlights

Will respond nimbly in case of rapid rise in long-term interest rates such as by increasing bond buying, conducting fixed-rate bond purchase operations, using fund-supply operations against pooled collateral.

Japan’s economic growth likely to moderate as trade policies lead to slowdown in overseas economy, decline in corporate profits.

Will keep raising rates if economy, prices improve.

No big change to overall picture of japan’s economy, prices from last MPM.

Made decision on bond tapering based on market participants’ opinion.

Aware that rising food prices having impact on households.

Will continue to carefully monitor data in deciding policy.

Bond tapering is preventative measure against uncertainties in bond market.

Further rate hike would depend on likelihood of achieving our outlook.

Closely monitor Middle East tension.

Unable to ignore risks on trade policies reversing wage-setting behavior among companies especially manufacturers.

This section below was published on June 17 at 03:31 GMT to cover the Bank of Japan’s monetary policy announcements and the initial market reaction.

The Bank of Japan (BoJ) announced on Tuesday to keep the short-term interest rate target steady in the range of 0.4%- 0.5% after ending its two-day monetary policy review meeting.

The decision was widely expected.

The Japanese central bank extended the pause in its rate-hiking cycle into the third meeting in a row, having delivered a 25 basis points (bps) hike in January.

Summary of the BoJ policy statement

BoJ makes rate decision by unanimous vote.

Japan’s economy recovering moderately, although some weakness has been seen.

Inflation expectations have risen moderately.

Extremely uncertain how global trade policies will evolve and how overseas economic activities will react to them.

Necessary to pay due attention to impact of trade policies on financial, FX markets.

Inflation expectations have risen moderately.

BoJ makes decision on bond taper plan by 8-1 vote.

BoJ board member Tamura dissented to decision on bond taper plan.

BoJ’s Tamura dissented to decision on bond taper plan, saying the bank should allow long-term interest rates to be determined by the market and its participants.

BoJ’s Tamura proposed that the bank reduce the amount of its monthly outright purchases of JGBs by about 400 billion yen each calendar quarter until January-March 2027 in principle.

To reduce amount of monthly JGB purchases by about 200 bln yen each quarter from April 2026 onward.

To reduce amount of monthly JGB purchases so it will be about 2 trillion yen in January-March 2027.

To leave unchanged existing bond taper plan running through March 2026.

Long-term interest rates are to be formed in markets.

Appropriate for the BoJ to reduce bond buying amount in predictable manner, while allowing enough flexibility to support market stability.

To conduct interim assessment of bond taper plan for April 2026 onward at June 2026 policy meeting.

Will respond nimbly in case of rapid rise in long-term interest rates such as by increasing bond buying, conducting fixed-rate bond purchase operations, using fund-supply operations against pooled collateral.

Prepared to amend bond taper plan at future policy meetings if deemed necessary.

Will announce bond taper plan for April 2027 and onwards at policy meeting in June 2026.

Market reaction to the BoJ policy announcements

USD/JPY has come under renewed selling pressure, dropping toward 144.50 in an immediate reaction to the Bank of Japan’s (BoJ) status quo on interest rates. The pair is currently trading flat on the day at 144.72.

This section below was published on June 16 at 23:00 GMT as a preview of the Bank of Japan Interest Rate Decision.

• The Bank of Japan is set to keep interest rates steady at 0.5% on Tuesday.
• The focus will be on the BoJ’s JGB purchases tapering plan as well as any hints on the timing of the next rate hike.
• The BoJ policy announcements are expected to significantly impact the Japanese Yen.

The Bank of Japan (BoJ) is widely expected to leave the short-term interest rate unadjusted at 0.5% after the two-day June monetary policy review ends on Tuesday.

In the absence of quarterly economic projections, all eyes will be on the BoJ’s plans on tapering its Japanese government bond (JGB) purchases and hints on the timing of the next interest rate hike. The BoJ policy announcements will likely stir volatility around the Japanese Yen (JPY).

What to expect from the BoJ interest rate decision?

The BoJ is set to extend the pause in its rate-hiking cycle into the third consecutive month in June, maintaining the policy rate at the highest level in 17 years.

At its April 30-May 1 policy meeting, the Japanese central bank stuck to its rhetoric that it “will continue to raise interest rates if the economy and prices move in line with forecasts.”

The bank also referred to the more volatile outlook due to US trade policy: “Uncertainty around tariff impact on the economy remains high even after tariffs are finalized.”

Since then, trade tensions have eased, courtesy of the US-China truce and the prospects of US trade agreements with Japan and the European Union (EU).

“If trade negotiations between countries proceed and uncertainty over trade policies diminish, overseas economies will resume a moderate growth path. That, in turn, will accelerate Japan’s economic growth,” Ueda said in a speech earlier this month, keeping hopes alive for another rate hike by year-end.

Therefore, markets expect the BoJ Chief Ueda to lean slightly hawkish while speaking on the interest rate outlook during the post-policy meeting press conference at 6.30 GMT.

Additionally, concerns over sticky food inflation, especially due to the rising costs of Japan’s staple rice, could prompt Ueda to deliver the hawkish message.

“Japan was now experiencing a second round of food price inflation driven by supply shocks, which adds to inflationary momentum from higher wages,” Ueda said previously.

Japan’s core Consumer Price Index (CPI) inflation exceeded the BoJ’s 2% target for over three years and hit a more than two-year high of 3.5% in April due largely to a 7% spike in food prices, per Reuters.

Apart from the BoJ’s communication on the next interest rate move, markets will also closely scrutinize the central bank’s assessment of the bank’s current JGB tapering plan of JPY400 billion per quarter.

According to a report carried by the Nikkei Asian Review last Saturday, the BoJ is considering halving the pace of quarterly tapering in its purchases of JGB to JPY200 billion ($1.4 billion) from April 2026.

The BoJ’s tapering plan is expected to be supported by a majority of the policy board members, the Nikkei added.

The potential reduction to the central bank’s tapering plan remains critical in light of the recent bond market turmoil when the yields on 40-year JGBs hit all-time highs.

How could the Bank of Japan’s interest rate decision affect USD/JPY?

The USD/JPY pair continues to trade in a 250-pips familiar range at around 144.00 in the run-up to the BoJ event risk.

If the BoJ maintains its rhetoric of remaining data-dependent and following the meeting-by-meeting approach for a policy move, the Japanese Yen (JPY) could come under intense selling pressure against the US Dollar (USD), driving USD/JPY back toward the 146.50 static resistance.

Conversely, USD/JPY could resume its downtrend toward 142.00 if the BoJ voices concerns over stubborn rises in food costs and acknowledges easing trade tensions. The BoJ’s hawkish tilt could ramp up the odds of another rate hike by the turn of this year, triggering a fresh JPY rally.

Any big reaction to the BoJ policy announcements could be temporary as Governor Ueda’s press conference could inject fresh volatility around the pair.

From a technical perspective, Dhwani Mehta, Asian Session Lead Analyst at FXStreet, notes: “The current market positioning suggests the USD/JPY remains exposed to two-way risks ahead of the BoJ’s decision. The pair is battling the 21-day Simple Moving Average (SMA) and the 50-day SMA confluence near the 144.00 region, with the 14-day Relative Strength Index (RSI) challenging the midline to regain the bullish territory.”

“A hawkish BoJ hold could provide a fresh leg to the USD/JPY downtrend, with the strong support area near 142.50 likely at risk. The next cushion is seen at the April 29 low at around 142.00. A decisive move below that level will target the 140.00 psychological mark. On the flip side, buyers need acceptance above the 145.00 round level to revive the uptrend toward the May 29 high of 146.29. Further up, the 100-day SMA at 147.24 will come into play,” Dhwani adds.