Bank of Japan Governor Haruhiko Kuroda reiterated in a document that if economic and price data meet expectations, the central bank will continue to raise interest rates.

According to the latest report from Bloomberg, Haruhiko Kuroda submitted a document on Tuesday to the government's economic and fiscal policy group to explain the Bank of Japan's policy decision in July, with Prime Minister Fumio Kishida serving as the chairman of the group.

After the news of Haruhiko Kuroda maintaining his interest rate stance, the yen to dollar exchange rate rose in the short term, now trading around 146.13 yen.

This document shows that Haruhiko Kuroda stated that due to the significantly negative real interest rates, the economic environment remains accommodative even after the interest rate hike in July.

At the end of July, the Bank of Japan announced both an interest rate hike and balance sheet reduction, with a higher-than-expected 15 basis point rate hike and a reduction of 400 billion yen in bond purchases per quarter. According to the latest document, the reason for the interest rate hike in July is that the economic and price trends are in line with the central bank's expectations, and there is an upward risk to prices.

Following this higher-than-expected 'hawkish' move, the majority of the market expects the Bank of Japan to have room for further interest rate hikes within the year.

JPMorgan believes that the inflation report in October is crucial, as many service prices will be revised in that month. If service prices actually rise as expected, this may prompt the Bank of Japan to further tighten monetary policy in December.

During the parliamentary hearing in mid-last month, Katsuo Ueda hinted that the central bank has no intention of rushing to raise interest rates, but instead will closely monitor the impact of unstable financial markets on inflation outlook. However, if the economic certainty increases, the Bank of Japan will not change its stance on monetary easing policy.

Affected by the depreciation of the yen, Tokyo's CPI accelerated by 2.6% year-on-year in August, significantly higher than the previous value of 2.2%, with the core CPI (excluding fresh food and energy) rising by 1.6% year-on-year, surpassing the expected 1.4% and the previous value of 1.5%. JPMorgan expects that in the short term, commodity prices will continue to be the main driving force for inflation, and wage pressures may further push up service prices.

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