Kazuo Ueda: No Tolerance for Core Inflation Further Exceeding 2%
nashnova research
BOJ Governor Kazuo Ueda said he cannot tolerate core inflation rising above 2% — his hardest line yet on the inflation ceiling, read by markets as a signal that a December rate hike remains firmly on the table.
What exactly did Ueda say?
Speaking after the IMF–World Bank meetings in Bangkok, Ueda stated: "Core inflation is roughly around 2% now, and we cannot tolerate it rising further."
This means → he has hard-anchored the BOJ's inflation ceiling at 2%, moving beyond the vague "close to target" language into an explicit red line.
He added that the October policy meeting will discuss whether to revise the official wording describing core inflation as "near the 2% target" — any change in that language would signal a tightening stance.
No hike in October — what about December?
Bloomberg reported, citing people familiar with the matter, that BOJ officials are leaning toward standing pat at the October 29–30 meeting but keeping a December move on the table.
Overnight swap pricing backs this up: traders put the odds of an October hike at below 5%, while December pricing has climbed to roughly 75%.
In plain terms = the market has all but skipped October and is betting on December.
What is the mood inside the BOJ?
Board member Junko Koeda warned Thursday that excessive caution is itself a risk, hinting at a possible rate hike in coming months.
The BOJ completed its second hike of the year in September — the fastest tightening cycle since 1990.
This reflects a growing hawkish consensus beyond the governor alone; board-level voices are laying the groundwork for further action.
Which variables will decide the timing?
Ueda listed Middle East tensions, AI-driven demand, and foreign-exchange rates as key factors shaping the policy timeline, without elaborating.
Sources said core inflation is expected to reach levels consistent with the 2% target within roughly a year and a half, with price trends broadly tracking the BOJ's forecasts.
This means → if inflation data stay elevated and external risks remain manageable, the BOJ's room to wait passively narrows further, and the probability of a December hike keeps rising.
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