Bank of Japan Governor: Will raise interest rates if the economic outlook is realized

On December 1, Bank of Japan Governor Kazuo Ueda delivered a speech in Nagoya. The market will closely watch his latest assessment of the "preliminary momentum of the spring wage negotiations" and "core inflation returning to 2%." If he makes positive comments, the market will consider it a strong signal for a rate hike in December.

Bank of Japan Governor Kazuo Ueda stated that real interest rates are very low. Even if the policy rate is raised, the overall environment will remain accommodative. After Ueda's remarks, the US dollar fell against the yen. Japan's 10-year government bond yield rose by 4 basis points to 1.84%, the highest since June 2008. The TOPIX index of Japan expanded its gains to 1%.

Nomura Securities believes there are two main points to focus on. The first is Governor Ueda's latest assessment of the spring wage negotiations. If he makes positive comments regarding spring wage increases, the market is likely to interpret it as an indication of a rate hike in December. Secondly, if Ueda raises his assessment of core inflation and suggests inflation is now closer to 2%, the market will view this as a hawkish statement.

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