BoJ Governor Ueda says the central bank communicates closely with the government

• Wages need to increase significantly for Japan to sustainably achieve BoJ’s price target.
• Mechanism in which wages and prices rise in tandem becoming embedded in Japan’s economy.
• Exchange rate fluctuations are now more likely to influence corporate behaviour.
• The impact of FX movements on prices is being closely watched.
• If economic activity and inflation align with forecasts, interest rate increases will continue.
• A rate hike would be appropriate if the economic outlook evolves as expected.
• General views on the economy were exchanged with Takaichi last month.
• The BoJ will carefully assess how Middle East developments affect domestic and global economic conditions.
• Persistently high oil prices could lift underlying inflation by pushing up medium- and long-term household and corporate inflation expectations.
• The BoJ will closely monitor the economic implications of the Middle East conflict.
• Developments in the Middle East could significantly affect both the global and Japanese economy through energy prices and market channels.
• Higher energy prices may also influence inflation expectations.
• Elevated oil prices worsen Japan’s terms of trade, weighing on the economy and underlying inflation dynamics.
• Oil prices have been rising sharply.

BoJ Governor Ueda's remarks underscore the central bank's commitment to sustaining inflation targets through wage increases, signaling a potentially hawkish stance if conditions align. His emphasis on the impact of exchange rate fluctuations on corporate behavior and inflation highlights the BoJ's close monitoring of external factors, particularly the influence of rising oil prices amid geopolitical tensions. This serves as a key signal for traders in the JPY and related assets, as any shift in rate expectations could lead to significant market movements.