(Reuters) -The Bank of Japan raised interest rates in a mostly unexpected move on Wednesday and unveiled a detailed plan to slow its massive bond buying, taking another step towards phasing out a decade of huge stimulus.

Following are excerpts from BOJ Governor Kazuo Ueda’s comments at his post-meeting news conference, which was conducted in Japanese, as translated by Reuters:

CONSUMPTION

“While rising prices may have affected consumption, it is moving on a firm note. Household sentiment is showing signs of bottoming out. Wage data has also shown rising pay. Our surveys also showed wage hikes broadening among smaller firms. We expect wage hikes to spread further, and underpin consumption and inflation.”

INFLATION

“We’ve also confirmed rises in services prices. We expect a moderate cycle of rising wages and inflation to continue. The weak yen is also pushing up import prices, so we need to be vigilant to the risk of an inflation overshoot.

“Even though we raised rates, real interest rates remain low. Our move won’t affect the economy much.”

RATE HIKES

“If the economy and prices move in line with our projection, we will continue to raise interest rates. In fact, we haven’t changed much our projection from April. We don’t see 0.5% as any key barrier when raising rates.”

ON WHETHER THE BOJ COULD RAISE RATES AGAIN THIS YEAR

“That depends on upcoming data. If conditions move in line with our forecast, or overshoot our forecast, we could raise interest rates further.

“By raising rates from very low levels and adjusting the degree of stimulus gradually, we can avoid the risk of having to make big adjustments in a short period of time.

“There is still a lot of uncertainty on where Japan’s natural rate of interest is. What we can say is that short-term rates are still pretty much below levels that could raise questions about whether we’re close to the neutral level.”

WEAK YEN AND INFLATION

“The yen has weakened since the start of this year, but we haven’t changed our consumer inflation forecasts that much. The weakening yen hasn’t changed our forecasts in a significant way. But there’s quite a significant risk of the weak yen leading to an overshoot of inflation.”

ON WHAT DATA WOULD BE IN FOCUS IN RATE-HIKE DECISION

“It won’t change much from before. Wage hikes and their impact on services inflation, as well as inflation expectations, are important. We are also looking at overall demand and the output gap. We’ll also scrutinise the impact of our rate hike on the economy. We’ll look at a wide range of data.

“We don’t have a pre-set idea in mind on the pace of future interest rate hikes. We’ll look at various data and once we have a collective view on developments, and judge that economic and price conditions are in line with our forecast, we’ll take action. It’s hard to say when that would be.”

ON WHETHER ANOTHER RATE HIKE BY YEAR-END IS NOT RULED OUT

“If data shows conditions are on track, and if such data accumulates, we would of course take the next step.”

NEUTRAL LEVEL OF RATES

“We don’t have a specific image on the neutral level of rates. But we won’t reach that level for quite some time. We haven’t narrowed down much the neutral level of rates yet, so we don’t have a path laid down. We’ll have to think about it as we go.”

(Reporting by Leika Kihara; Compiled and edited by Subhranshu Sahu)

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