Bank of Japan (BOJ) Governor Kazuo Ueda stated that the central bank will continue raising interest rates if inflation approaches its 2% target, regardless of potential losses on government bond holdings.
Speaking in parliament, Ueda emphasized that monetary policy decisions focus on price stability, not BOJ’s financial health. He also noted that selling government bonds remains an option.
The BOJ previously estimated that if short-term borrowing costs rise to 2%, it could face losses of up to 2 trillion yen ($13.3 billion). In the first half of last year, its bond holdings suffered record valuation losses of 13.66 trillion yen, while its exchange-traded fund (ETF) holdings gained 33.07 trillion yen.
Ueda also addressed the impact of a stock market decline, estimating that a 1,000-point drop in the Nikkei 225 could lead to a 1.8 trillion yen loss on BOJ’s ETF holdings.
Last week, the BOJ maintained interest rates and cited global economic uncertainties, particularly the potential effects of higher U.S. tariffs. However, Ueda acknowledged that rising food costs and strong wage growth could increase inflationary pressures.