BOJ head Ueda signals chance of ending negative rates – Yomiuri

By Leika Kihara

TOKYO (Reuters) -Bank of Japan Governor Kazuo Ueda said the central bank could end its negative interest rate policy when achievement of its 2% inflation target is in sight, the Yomiuri newspaper reported on Saturday, signalling possible interest rate hikes.

The central bank could have enough data by year-end to determine whether it can end negative rates, Ueda told the paper in an interview on Wednesday.

“Once we’re convinced Japan will see sustained rises in inflation accompanied by wage growth, there are various options we can take,” Ueda was quoted as saying.

“If we judge that Japan can achieve its inflation target even after ending negative rates, we’ll do so,” he added.

The BOJ currently guides short-term interest rates at -0.1% under its negative rate policy. It also caps the 10-year government bond yield around zero as part of efforts to reflate the economy and sustainably achieve its target.

With inflation exceeding its 2% target for more than a year, markets have been rife with speculation the BOJ will soon start raising interest rates.

But Ueda has stressed the need to maintain ultra-loose policy until the BOJ is convinced inflation will sustainably stay around 2% backed by solid demand and wage growth.

Ueda repeated the stance in the interview, saying the BOJ will “patiently” maintain ultra-loose policy for the time being.

“While Japan is showing budding positive signs, achievement of our target isn’t in sight yet,” he told the interviewer.

The BOJ will not turn a blind eye to the risk of inflation exceeding expectations, Ueda said, adding wage rises are beginning to push up service prices.

The key is whether wages will keep rising next year, Ueda said. “We can’t rule out the possibility we’ll get enough information and data by year-end,” he was quoted as saying on the timing for ending negative rates.

Under a negative rate policy, banks and other financial institutions are required to pay interest for parking excess cash — beyond what authorities say they must keep on hand for safety reasons — with the central bank.

(Reporting by Leika Kihara; editing by Jonathan Oatis, Josie Kao and David Gregorio)