BOJ Deputy Chief Calls for Timely Rate Hikes Amid Inflation Risks

Bank of Japan (BOJ) deputy governor Ryozo Himino emphasized the importance of timely interest rate hikes to address inflation risks. Speaking on August 27, Himino noted that underlying inflation is approaching 2 per cent and that the BOJ must focus on stabilizing price growth around this level.

Himino stressed that raising rates in a timely manner will help avoid a spike in inflation and abrupt rate hikes in the future. He also highlighted mounting inflationary pressures caused by rising fuel costs from the Middle East war, robust global artificial intelligence demand, and high import prices from a weak yen.

While Himino refrained from giving explicit signals on whether the BOJ would meet market expectations of a September rate hike, his views on the economic and price outlook have not changed much since the BOJ's previous meeting in July. Himino noted that weak signs in second-quarter gross domestic product data were likely due to technical factors.

Market analysts believe that the BOJ is set to raise rates as soon as September, with some sources predicting more aggressive hikes thereafter. Himino countered the view held by some analysts that hiking rates further could hurt a fragile economy, arguing that adjusting still-loose financial conditions would help distribute assets more efficiently to investment with growth potential.