BOJ chief warns of strong global uncertainty from US tariffs

By Leika Kihara

CAPE TOWN (Reuters) -Bank of Japan Governor Kazuo Ueda on Thursday warned of "very strong" uncertainty on the global economic outlook that required vigilance in setting monetary policy.

Speaking after attending the Group of 20 finance leaders' meeting in South Africa, Ueda said many members appeared to share the view there was uncertainty over how U.S. tariff policies could unfold, and how such moves could affect their economies.

"There is very strong uncertainty on the U.S. policy outlook, including on tariffs, and how other countries could respond. As such, we need to scrutinise developments," Ueda told a news conference after the G20 meeting.

"We then need to take a comprehensive view on how (the U.S. policies) affect the global economy, financial markets and Japan's economic and price outlook" in setting monetary policy, he said, when asked how global uncertainties could affect the BOJ's interest rate decisions.

There are growing market expectations that recent data showing Japan's solid economic growth and sticky inflation will prod the central bank to raise its short-term interest rate further from the current 0.5% level.

Growing market bets of a near-term BOJ rate hike have helped push up the yen, offering some relief for Japanese policymakers who fret about the pain the currency's weakness has inflicted on households and retailers through rising import costs.

In a sign the government had no issues with yen gains driven by further rate hikes, Japan's top currency diplomat, Atsushi Mimura, said on Wednesday he did not see any disparity between recent rises in the yen and a slew of positive economic data.

Ueda declined to comment on recent rises in Japan's long-term interest rates, but he reiterated the BOJ's readiness to conduct emergency bond-buying operations if bond yields spike in an unusual fashion.

The BOJ ended a decade-long massive stimulus last year and raised its short-term interest rate to 0.5% from 0.25% in January on the view that Japan was on the cusp of sustainably achieving its 2% inflation target.

BOJ policymakers have signaled the bank's readiness to raise rates further if Japan continues to make progress in durably achieving its 2% inflation target.

(Reporting by Leika Kihara; editing by Alexander Winning, Mark Heinrich and Paul Simao)