Himino: Bank of Japan Set to Keep Raising Rates

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The Governor of the Bank of Japan Deputy Ryozo Himino reaffirmed the central bank’s commitment to further interest rate hikes if inflation persists at current levels.

Himino noted that while financial markets remain unpredictable, the BOJ will keep a close watch on them. His remarks align with recent statements from Governor Kazuo Ueda, who also emphasized that market volatility won’t derail the long-term plans for rate increases.

Himino mentioned that the BOJ intends to carefully evaluate the effects of recent market fluctuations, the recent rate hikes, and the state of the U.S. economy on its economic outlook. The central bank remains focused on adjusting monetary policy based on economic activity and price trends.

In July, the BOJ surprised markets by raising interest rates to their highest level in 15 years, indicating that further hikes could be on the horizon if inflation continues to rise and hits the 2% target. This move led to a sharp appreciation of the yen and a drop in Tokyo stocks, though markets have since stabilized.

Bank Governor Kazuo Ueda addressed parliament last week, reaffirming that he would continue raising interest rates if inflation stays at current levels.

A Reuters poll revealed that most economists anticipate the BOJ will raise rates again this year, with the majority predicting the move will occur in December rather than October.

Before the press conference, Deputy Governor of the Bank of Japan Ryozo Himino expressed optimism about Japan’s economic outlook, noting that the main growth and inflation forecasts align with the BOJ’s expectations. He also mentioned that the yen’s recent strength could help offset the impact of rising import costs and lower profits for many small and medium-sized businesses.

While a stronger yen might put pressure on profits for export-driven companies, Deputy Governor Himino noted that the difference between current rates and corporate plans isn’t too significant.

He also mentioned that stock market volatility shouldn’t overly impact business sentiment, as Japanese companies have adapted and become more competitive.

Private consumption, once a weak spot in the economy, should benefit from wage growth and controlled inflation. However, Himino emphasized that the BOJ must remain cautious about the risks of ongoing inflationary pressures, which could erode real wages.