BOJ chief flags inflation overshoot risk, stresses importance of 2% anchor

TOKYO, Oct 16 : Bank of Japan Governor Kazuo Ueda on Friday reiterated the risks of underlying inflation overshooting the central bank's 2 per cent target, stressing the growing importance of keeping price pressures anchored around that level.

In a speech read out by Deputy Governor Shinichi Uchida at a meeting of Japanese credit unions, Ueda said factors including tensions in the Middle East, AI-related demand and currency swings could affect Japan's economy and prices, pointing to a risk that underlying inflation could exceed the BOJ's price target.

"The perspective of anchoring underlying inflation at around 2 per cent has become more important than before," Ueda said, highlighting the need to ensure that any overshoot of the BOJ's target does not harm the economy.

The speech, which largely repeated remarks Ueda made earlier this month, comes ahead of the BOJ's October 29 and 30 policy meeting, when the central bank will release fresh quarterly growth and inflation forecasts that market participants will scrutinise for clues on the timing of the next rate hike.

The BOJ raised its key rate to a 31-year high last month, while signalling that it had entered a phase focused on preventing underlying inflation from overshooting its target, raising the prospect of tighter policy.