Market News

Summary

• BOJ elaborates in report risk from persistent food inflation
• Shift in inflation bias, receding gloom from tariffs also key
• Ueda warns of uncertainty but notes policy rate still very low
• BOJ de-activates rate hike pause, wage outlook key

TOKYO, Aug 1 (Reuters) - The Bank of Japan laid the groundwork this week for resuming interest rate hikes by spelling out explicitly for the first time the risks that persistent food price rises fan broad-based inflation.
While markets took a dovish reading of BOJ Governor Kazuo Ueda's commentary after Thursday's policy meeting, much of his guidance suggests the bank is inching back towards action after a period of waiting and watching, analysts say.

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A shift in the board's inflation bias and its less gloomy view on the impact of U.S. tariffs also underscore the BOJ's resolve to pull the trigger once it is convinced the damage from higher levies will be within its expectations.

Such hawkish signals in the BOJ's quarterly report, which represents the board's consensus view on the policy outlook, were qualified by Ueda's comments suggesting he was in no rush to raise interest rates.
Still, Ueda said Japan was making some progress towards durably hitting the BOJ's 2% inflation target and stressed that its policy rate - at 0.5% - remains very low.