TOKYO (Kyodo) -- Bank of Japan Governor Kazuo Ueda said Thursday the country faces smaller risks from the U.S. and other overseas economies, signaling that the central bank is closer to an additional interest rate hike, possibly in the coming months.

The BOJ kept its policy rate unchanged at around 0.25 percent, as widely expected at the end of a two-day meeting earlier in the day, amid political uncertainty following the loss by the Japanese ruling parties of their majority in the recent general election and ahead of the U.S. presidential election next week.

However, Ueda suggested at a post-meeting press conference that the BOJ is gradually getting ready for further rate hikes, saying he is less concerned about the U.S. economy, citing its robust employment and other economic indicators.

"The degree of risk (from overseas economies) is shrinking little by little," Ueda said. "The fog is being cleared."

Ueda, who last month underscored the bank had "more time" to assess if another rate increase was necessary, told the news conference that he will no longer use that expression, adding the BOJ will raise rates further if the Japanese economy and prices move in line with its expectations.

Following his remarks, the yen strengthened by about 1 yen to the 151 range against the U.S. dollar.

Still, some analysts pointed out that Ueda's comments do not necessarily mean the BOJ will raise borrowing costs right away.

"Financial markets remain unstable, and there is uncertainty over wage talks next year," said Shinichiro Kobayashi, an economist at Mitsubishi UFJ Research and Consulting, who expects the next rate increase in March when the results of the spring wage negotiations become clear.

"I think Mr. Ueda's hawkish comments reflected the BOJ trying to prevent further depreciation of the yen," he said.

The yen's continued weakness, due largely to interest rate differentials between Japan and the United States, has been pushing up import costs, dealing a financial blow to Japanese households.

Kyohei Morita, chief economist at Nomura Securities Co., said, "We should just take Mr. Ueda's remarks as meaning the bank will make policy decisions based on economic fundamentals in Japan going forward rather than on overseas factors."

Morita expects the BOJ to raise interest rates in December.

Ueda said the bank has no fixed schedule for rate increases, noting it will make decisions based on data available when it holds a policy meeting.

The BOJ also updated its growth and price outlook, forecasting Japan's core consumer inflation, excluding fresh foods, will be at 2.5 percent for the current fiscal year ending March, unchanged from the earlier projection.

However, it lowered the projected inflation rate for fiscal 2025 from 2.1 percent to 1.9 percent, below the bank's price stability goal of 2 percent, saying recently falling oil and other natural resource costs could affect overall price trends. For fiscal 2026 it maintained its forecast at 1.9 percent.

The BOJ's decision came as its policy board examined the impact on financial markets of the setback suffered by Prime Minister Shigeru Ishiba's Liberal Democratic Party and ally Komeito party in Sunday's House of Representatives election.

Analysts say the complicated political situation will likely make Ishiba reluctant to proactively endorse the BOJ's shift away from a decade of unorthodox monetary easing and toward higher borrowing costs that may slow business activity and the economy as a whole.

The BOJ is also awaiting the results of the Nov. 5 U.S. presidential election, which could greatly influence financial markets.

The U.S. government, regardless of whether the Democratic nominee Kamala Harris or her Republican rival Donald Trump wins the election, is expected to increase public spending.

Analysts say this could lead to higher inflation and prompt the Federal Reserve to slow the pace of interest rate cuts, meaning the yen could weaken further against the dollar.

In the latest outlook, the BOJ expects the Japanese economy to expand 1.1 percent for fiscal 2025, upgraded from 1.0 percent forecast in July. It also maintained its projections for real gross domestic product for fiscal 2024 and 2026 to rise by 0.6 percent and 1.0 percent, respectively.

The BOJ ended its negative rate policy in March with the first rate hike in 17 years, followed by another increase in July.

(By Yuki Yamaguchi)