Bank of Japan's confidence call: We will not raise interest rates if the market is unstable

As the epicenter of this stock market turmoil, Bank of Japan Deputy Governor Uchida has spoken out! "If the market is unstable, we will not raise interest rates; we need to continue easing at the current level," he said! Encouraged by Uchida's remarks, Japanese stocks and the yen are both on the rise.

BOJ Deputy Governor Uchida: We Will Not Raise Interest Rates If the Market is Unstable

The Bank of Japan (BOJ) adopted a hawkish stance and raised interest rates to 0.25% on July 31, gradually reducing bond purchases. This led to a significant appreciation of the yen, forcing the closure of carry trades and ultimately triggering a major sell-off in the stock market. The Nikkei 225 index experienced its largest single-day drop in history on Monday, falling by 4,451.28 points to 31,458.42 points, a decline of 12.40%.

According to Reuters, BOJ Deputy Governor Shinichi Uchida stated during a speech at the Hakodate Financial and Economic Conference that the Bank of Japan would not raise interest rates due to the unstable financial and capital market conditions. He explained that unlike the tightening processes in Europe and the United States, policy responses would not be delayed unless interest rates were raised at a certain pace. He emphasized:

If the market remains unstable, it is necessary to temporarily continue implementing monetary easing policies at the current level.

Regarding the recent stock price volatility, Uchida pointed out that stock prices affect individual consumption, economic and price prospects through corporate investment behavior and wealth effects, making them an important factor in policy management. The government will "closely monitor the dynamics of domestic and foreign financial capital markets and respond appropriately in policy management."

Uchida also expressed his personal view on the future prospects of the U.S. economy, stating that a "soft landing is highly likely to be seen."

As for the reasons for the rise in Japanese stock prices, he explained that "corporate profitability has improved." The economic fundamentals of both Japan and the United States have not undergone significant changes.

Japanese Stocks and Yen Strengthened

Encouraged by Uchida's remarks, the Nikkei 225 index rose steadily after an initial decline in the morning, surging by over a thousand points at one point. As of the deadline, it had risen by 2.28% to 35,464.

The USD/JPY exchange rate also climbed from 144.78 to above 147, rising by 1.56% to 146.54 as of the deadline.