Bank of Japan Deputy Governor Shinichi Uchida stated on Friday that the central bank is prepared to "adjust the degree of monetary support" if the economy and prices align with its forecasts, indicating a potential increase in interest rates.
"Japan's economy is recovering moderately, despite some signs of weakness," Uchida said at an annual meeting of trust unions, delivering the speech on behalf of Governor Kazuo Ueda.
The deputy governor also mentioned that Japan's underlying inflation is expected to gradually accelerate towards the BOJ's 2% target, driven by rising wages and prices that are boosting inflation expectations.
After ending eight years of negative interest rates in March, the BOJ has indicated its intention to raise short-term rates further from the current range of 0-0.1%.
During last week's policy meeting, the central bank announced plans to outline in July how it will reduce its extensive bond-buying program over the next one to two years.
Uchida reiterated Governor Ueda's remarks from last week's post-meeting press conference, stating that the BOJ's bond tapering will be "significant."
Many market participants anticipate another rate hike by the BOJ this year, with opinions divided on whether it will occur as early as July or later in the year.
The central bank has also faced pressure to initiate quantitative tightening (QT) and reduce its nearly $5 trillion balance sheet to ensure the effectiveness of future rate hikes in the economy.
Paraphrasing text from "Reuters" all rights reserved by the original author.
