The latest speech by Bank of Japan Governor Kazuo Ueda has attracted market attention. The BOJ leader revealed expectations for future rate hikes, although no specific timetable was provided. The signals conveyed between the lines are worth careful consideration. The market generally interprets his stance as neutral to dovish.

This time, the Bank of Japan decisively moved, raising interest rates by 25 basis points to 0.75%. This is the highest level in Japan in 30 years, indicating that Japan is officially bidding farewell to the low-interest-rate era and gradually returning to a normal interest rate range. This shift has a significant impact on global financial markets.

Ueda emphasized that this rate hike is not an aggressive tightening policy but a gradual approach based on economic, price, and financial conditions. This statement is largely consistent with the market expectations previously expressed by Sanae Takaichi, indicating a relatively unified policy outlook among Japan’s top officials.

Interestingly, Ueda did not explicitly specify Japan’s neutral interest rate level. While nominal rates are rising, real interest rates remain relatively low, suggesting that the overall financial environment is still in an easing cycle. In other words, the Bank of Japan still has ample room for flexibility in its monetary policy.

The most crucial point is that Ueda clearly stated that future rate hikes will be entirely data-driven. Economic growth, inflation levels, wage growth dynamics—these will all be key factors in determining the pace of future increases. Especially if wage growth pushes inflation expectations higher, it could trigger a new round of rate hikes. In essence, inflation data will be the real driver influencing the yen’s subsequent trajectory.

Throughout the speech, Ueda deliberately avoided providing specific timelines and magnitude expectations for future rate hikes, instead leaving decision-making to economic data. For the market, this is a relatively moderate stance, but it also leaves ample room for future policy adjustments. This "flexible + cautious" balance may well be the optimal approach amid current global economic uncertainties.