The Bank of Japan will continue to raise its benchmark interest rate if its economic projections are realized, Gov. Kazuo Ueda said.

"Although there are pockets of weakness, the economy is recovering moderately,” Ueda said Wednesday in his semiannual report to parliament. "We believe that growth has continued to exceed the potential growth rate as the positive cycle from income to spending gradually strengthened against the backdrop of accommodative financial conditions and other factors.”

Ueda said authorities expect the underlying consumer price trend to reach the 2% target in the second half of its projection period ending in March 2027. If that proves true, the bank will continue to unwind its easy settings with rate hikes.

"If the economic and price outlook outlined in the Outlook Report is realized, we will continue to raise policy interest rates and adjust the level of monetary easing,” he said.

Ueda spoke a week after the bank’s policy board voted unanimously to keep policy settings steady as authorities assess the impact of a January rate hike and weigh the risks to the economic outlook. Ueda noted that overseas trade policies were among factors that have added to uncertainties.

His remarks were in line with his comments after last week’s board meeting, and they send a signal that the bank remains on course for further gradual rate hikes as conditions allow. Ueda reiterated that currency moves are more likely to affect prices than in the past, although he also expects the impact on import prices to wane going forward.

The yen weakened after his comments and was trading around ¥150.27 to the dollar by mid-morning in Tokyo.

Some of Ueda’s testimony before parliament amounted to a review of the past. Asked about the ultraeasy policies promoted by his predecessor, Haruhiko Kuroda, Ueda said the policies had a positive effect on the economy overall, although there were also side effects that warrant continued attention.