The yen rose in response as Ueda Kazuo stated that he would "seriously" consider the impact of exchange rates on the economy and prices

According to the Zhitong Finance APP, Bank of Japan Governor Kazuo Ueda stated on Thursday that the central bank will "seriously" consider exchange rate fluctuations when compiling economic and price forecasts. Regarding monetary policy, Ueda reiterated that the Bank of Japan will make decisions "one meeting at a time" based on available information. He pointed out that there is still a month until the Bank of Japan's next policy meeting in December, at which time more information will need to be digested.

After Ueda's speech, the market interpreted it as a signal that a rate hike might be possible next month, with the USD/JPY exchange rate dropping by 0.47% to 154.65. The yield on 5-year Japanese government bonds rose by 4 basis points to 0.75%, the highest level since June 2009. As of the time of writing, the USD/JPY exchange rate fell by 0.42% to 154.79.

A weak yen typically raises import costs and inflation, which was one of the factors leading to the Bank of Japan's decision to raise interest rates in July.

At the Europlace Financial Forum held in Tokyo, when asked about the impact of exchange rate fluctuations, Ueda said, "When forming our economic and inflation outlook, we do indeed seriously consider exchange rate fluctuations, including the reasons for the current exchange rate changes."

The forum focused on how technological innovation can create risks in the financial system. In his speech at the forum, Ueda did not comment on monetary policy.

The recent rise of the dollar is partly due to market expectations that the inflation policies proposed by U.S. President Donald Trump may prevent the Federal Reserve from excessively cutting interest rates, thereby putting downward pressure on the yen. Ueda stated that it is difficult to predict how Trump's policies will affect the Japanese economy. He said, "Once the new government announces new policies, we hope to incorporate them into our economic outlook."

Previously, believing that Japan was about to sustainably achieve its 2% inflation target, the Bank of Japan ended its negative interest rate policy in March and raised the short-term policy interest rate to 0.25% in July. Ueda has indicated that if economic and price trends align with their forecasts, the Bank of Japan is prepared to raise interest rates again.

A survey conducted by foreign media from October 3 to 11 showed that most economists expect the Bank of Japan will not raise interest rates this year, although nearly 90% expect the Bank of Japan to raise rates in March next year