Bank of Japan deputy governor says interest rates will not be raised when markets are unstable

On April 27, 2022, the Japanese flag fluttered over the Bank of Japan (BoJ) headquarters building (bottom) in Tokyo.

Kazuhiro Nogi | AFP | Getty Images

Bank of Japan Deputy Governor Shinichi Uchida said on Wednesday that the central bank will not raise interest rates when financial markets are unstable.

Uchida said the recent strengthening of the yen will influence the Bank of Japan’s policy decisions because it reduces upward pressure on import prices, thereby reducing overall inflation.

He said that stock market fluctuations will also affect business activities and consumption, which will in turn affect the central bank’s decision-making.

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“As we see severe fluctuations in domestic and overseas financial markets, it is necessary to maintain the current level of monetary easing for the time being,” Uchida said in a speech to business leaders in the northern Japanese city of Hakodate.

He said the Bank of Japan’s interest rate path would change “significantly” if market volatility affects the Bank of Japan’s economic and price outlook, risk perceptions and the likelihood of sustainably achieving its 2% inflation target.

“When financial markets are unstable, we will not raise interest rates,” Uchida said.