Bank of Japan Governor Ueda recently spoke about the bank’s policy decisions and interest rate discussions. He pointed out that underlying inflation is below 2% but getting closer to that target. The board disagreed with proposals from board members Takata and Tamura. Ueda highlighted the need to analyze data, especially with uncertainties in trade policies.

Bank’s Asset Strategy

The Bank will keep selling ETFs and J-REITs until their holdings are fully sold off. This sale won’t affect the pace of monetary policy changes. At the current rate, it will take 112 years to fully offload these assets. Ueda’s comments align with the majority opinion, downplaying any opposing views. As a result, the USD/JPY has recovered earlier losses and now stands at 147.95. Governor Ueda’s statements suggest that the Bank of Japan is in no hurry to change its current approach. He is clearly opposing the more aggressive board members and reinforcing the majority view to gather more data before raising rates. The market reacted quickly, strengthening the USD/JPY as hopes for a near-term rate hike faded. This reinforces the belief that taking a short position on the Japanese Yen is currently the easiest strategy. The interest rate gap between Japan and the US remains significant, with the Federal Reserve keeping its key rate around 4.5% while the BOJ stays near zero. This situation makes the carry trade—borrowing yen cheaply to invest in higher-yielding US dollars—very profitable. For derivative traders, buying USD/JPY call options is an appealing strategy. This allows for profit if the pair moves higher toward the 150 level, while limiting our risk if the BOJ unexpectedly changes its policy. Implied volatility may be low due to the BOJ’s steady approach, making options relatively affordable.

Internal BOJ Dynamics

However, we need to keep a close eye on dissent from members Takata and Tamura. While Ueda is downplaying this dissent now, it clearly shows a crack in the BOJ’s previously united dovish stance. A surprisingly strong inflation report could encourage these more hawkish members to shift the board’s consensus much quicker than the market anticipates. The current data supports Ueda’s cautious stance for now. The latest core CPI report for August 2025 was 1.9%, reaffirming that inflation is still below their 2% target. Additionally, the most recent Tankan survey revealed a slight decline in confidence among large manufacturers, who are worried about global tariffs. Looking back, this period of inactivity resembles the long pause after the initial small rate hike in March 2024. The BOJ has a history of moving more slowly than other central banks. For now, we should expect this trend to continue until inflation data clearly forces their hand. Create your live VT Markets account and start trading now.

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