BoJ Won't Hike Rates When Markets Are Unstable, Uchida Says

(RTTNews) - The Bank of Japan will not hike its policy rate when financial and capital markets are unstable, Deputy Governor Uchida Shinichi said Wednesday after hawkish comments from Governor Kazuo Ueda and fears of a U.S. recession led to a global market rout in the past few trading days.

"If the outlook, the upside and downside risks to the outlook, or the likelihood of realizing the outlook change as a result of these market developments, the path of the policy interest rate will certainly change," a dovish Uchida said in a speech in Hakodate. "In fact, in contrast to the process of policy interest rate hikes in Europe and the United States, Japan's economy is not in a situation where the Bank may fall behind the curve if it does not raise the policy interest rate at a certain pace," the policymaker added.

"Therefore, the Bank will not raise its policy interest rate when financial and capital markets are unstable," the banker said.

Last week, the BoJ had lifted its benchmark interest rate to around 0.25 percent from around 0-0.1 percent and also outlined its tapering plans.

Following the decision, BoJ Governor Ueda said the bank will continue to raise interest rates if the economy and prices move in line with the projection. He also said that 0.5 percent may not act as a key barrier when raising rates.

Thereafter, the U.S. labor data triggered fears of a recession in the U.S. and pushed the Japanese yen higher. Together with rising geopolitical tension in the Middle East, stock markets around the world crashed on Monday as investors moved towards safer havens.

The global market sell-off on Monday was led by Japan's Nikkei that recorded its biggest slump since "Black Monday" in October 1987.