BOJ Governor Ueda: Uncertainty Remains Over Whether 2% Inflation Can Be Sustained
nashnova research
Japan's underlying inflation has hit 2% for the first time since the target was set, but Governor Kazuo Ueda told an IMF audience he is "not sure" it will stick — meaning the rate-hike path is far from locked in, and market pricing will keep swinging with the data.
Inflation hit 2% — so why is the governor saying "uncertain"?
Japan's underlying inflation reached 2% for the first time since the target was set in 2013. Ueda called it "an important milestone."
But he immediately added: "Whether we can maintain this equilibrium over the long term, we are not sure."
This means → hitting the target once is only the starting line. The BOJ needs inflation to stay at 2% for several years before it calls the job done.
In plain terms = passing the exam once doesn't count — you need to pass it year after year before the teacher believes you've truly learned the material.
"2% hasn't become a social norm" — what is Ueda really saying?
Ueda stated plainly: "2% inflation has not yet fully become a social norm."
This reflects nearly three decades of low inflation and deflation in Japan — households and firms still expect prices to stay flat.
This means → if people still feel "things won't get more expensive," companies won't raise wages, and inflation will slide back down.
Ueda's conclusion: the BOJ must keep 2% in place for years through appropriate policy adjustments before it truly takes root.
How fast is the BOJ tightening?
The BOJ raised its benchmark rate by 25 basis points to 1.25% in September — the first time the BOJ, the Fed, and the ECB all hiked in the same month.
It was also the BOJ's second hike in three months, the shortest interval since 1990.
Ueda noted that Japanese bank lending is growing above 5%, the fastest pace in thirty years.
In plain terms = companies are willing to borrow and expand again. That is the signal inflation is "alive," and it gives the BOJ the confidence to keep hiking.
How is the market betting on the next move?
Overnight index swaps — contracts that price in future rate decisions — put the probability of another hike at the December 18 meeting at roughly 68%.
A Bloomberg survey found over 80% of economists expect at least one more hike this year.
But the terminal rate — where this hiking cycle ultimately stops — is disputed: the economist median says 1.75%, while BNP Paribas and JPMorgan Securities project 2.5%.
This means → everyone agrees "more hikes are coming," but where they stop differs by as much as 75 basis points — a significant gap.
How much time does Ueda have left, and why does it matter?
Since taking office in April 2023, Ueda has raised rates six times — the most by any single governor in at least half a century.
His five-year term has less than a year and a half remaining.
This means → his policy window is narrowing. If inflation data soften, the remaining tenure may not be enough to complete the full hiking cycle.
市场有风险，内容仅供研究参考，不构成投资建议。