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Japan’s Central bank must remain vigilant to potential risks from volatile markets and global uncertainties, according to Bank of Japan Governor Kazuo Ueda. Prime Minister Shigeru Ishiba has urged the BOJ to maintain loose monetary policy to help combat economic stagnation.

The government stated that Ishiba and Ueda will meet for the first time since Ishiba assumed office. In a speech to a securities industry gathering, Ueda emphasized the need for caution in raising Interest rates, citing the uncertain outlook for overseas economies and ongoing financial market instability.

While the BOJ had previously indicated its intention to raise rates if Inflation approached its 2% target, Ueda focused on the prevailing risks in the economy and refrained from reiterating the commitment to rate hikes. The Central bank had discontinued negative rates in March and raised short-term borrowing costs to 0.25% in July to signal progress towards achieving sustainable Inflation.

The comments by Ueda underscore the importance of monitoring market volatility and economic repercussions, following previous turbulence triggered by rate hike speculation and weak U.S. economic data. Economy Minister Ryosei Akazawa echoed the government’s stance of prioritizing the fight against deflation over further interest rate increases.

Akazawa highlighted the relatively low Japanese policy rate compared to global standards and expressed hope that the BOJ would exercise caution in any future rate hikes. The focus remains on steering the economy out of deflation and promoting industrial competitiveness.

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