BoJ’s Ueda: Central bank will continue to raise policy rates - FXStreet

Bank of Japan Governor Kazuo Ueda has signalled that the central bank will continue raising its policy rate, reinforcing the view that Japan's era of ultra-loose monetary policy is gradually winding down. The remark matters because Japan has long been an outlier among major economies, keeping borrowing costs near zero while others tightened. Any shift in that stance ripples through currency, bond and equity markets worldwide.

For markets, the key transmission channel is the yen. Higher Japanese rates tend to narrow the interest-rate gap with other economies, which can support the currency after prolonged weakness. A stronger yen, in turn, can affect Japanese exporters' earnings and the appeal of yen-funded carry trades, in which investors borrow cheaply in yen to buy higher-yielding assets elsewhere.

What to watch: the pace and size of future increases, upcoming inflation and wage data, and whether the BoJ's guidance stays consistent with its inflation target. The direction is clearer than the timing — and timing, as ever, is what markets price.