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Governor Ueda of the Bank of Japan provided a summary explanation at the House of Councillors Financial Affairs Committee for the semi-annual "Report on Currency and Monetary Policy."

While there are some signs of weakness, the Japanese economy is gradually recovering. The consumer price index is expected to rise above 2% in the next fiscal year, and uncertainty surrounding prices remains extremely high. The bank is closely monitoring trends in financial and foreign exchange markets, as well as their impact on the economy and prices.

The bank has reached a point where it can foresee the sustained and stable achievement of the 2% inflation target. Short-term interest rates will be used as the main policy tool to appropriately manage monetary policy. It is believed that an accommodative monetary environment will continue for the time being.

The pace of interest rate changes will depend on the economic situation. If the economy moves towards the 2% target as expected, the bank may reduce the degree of easing. If downward pressure on the economy increases, the pace of easing reduction might be slowed down. There is still a non-zero chance of a downside surprise, although the risk of a significant downturn has significantly decreased.

If inflation is affected, foreign exchange measures will also be considered. Both negative interest rates and Yield Curve Control (YCC) have supported Japan's economy and prices through a reduction in real interest rates. There is currently no need to reintroduce negative interest rates, and the government will make a comprehensive judgment on exiting deflation.

Comments on the movements and levels of exchange rates are withheld. A stable transition of exchange rates in line with fundamentals is important. Monetary policy is one of the fundamentals that determine exchange rates, not a tool to control them.

A reduction in long-term government bonds can be expected, but no definite statements about the timing can be made. Comments on specific proposals for reducing ETFs are withheld. The bank is not considering disposing of ETFs immediately.