By Leika Kihara
TOKYO (Reuters) - The Bank of Japan will "patiently" maintain ultra-loose monetary policy and respond "nimbly" to economic, price and financial developments, its governor Kazuo Ueda said on Friday, warning of extremely high uncertainty over the outlook.
Ueda said Japan's economy is recovering moderately with the fading effect of supply constraints offsetting the hit to exports from slowing global demand.
Inflation is likely to slow as cost-push pressure dissipate, but re-accelerate thereafter due to a strengthening economy and changes in corporate wage-setting behaviour, he said.
But Ueda said the BOJ must carefully watch financial and currency market developments and their impact on Japan's economy as uncertainty regarding the outlook was extremely high.
"With uncertainty surrounding domestic and overseas economies as well as financial markets extremely high, the BOJ will respond nimbly to economic, price and financial developments," Ueda said.
"By patiently maintaining easy monetary policy, the BOJ will seek to sustainably and stably achieve its 2% inflation target, accompanied by wage rises," he said.
Ueda's remarks come ahead of the BOJ's policy meeting on Oct. 30-31, when the central bank will conduct a quarterly review of its economic and price forecasts.