BOJ Deputy Governor Himino Signals No Rate Hike Timing in Speech

Japanese government bond yields retreated on Thursday after Bank of Japan Deputy Governor Ryozo Himino's speech, which stopped short of indicating when interest rates could next be raised.

Himino emphasized the need for timely policy adjustments and said policymakers should conduct in-depth deliberations on price pressures at every policy meeting. His remarks reinforced expectations that the BOJ remains on a path towards further monetary tightening but offered no clear signal that a rate hike would come at the central bank's September meeting.

Investors have positioned for a faster pace of rate hikes following joint Japanese-US efforts in July to support the yen, and persistent inflation pressures have strengthened expectations that the BOJ may continue moving away from its ultra-loose monetary policy. The two-year JGB yield briefly climbed to 1.70% on Thursday, its highest level since 1995, before turning flat at 1.685%, while the five-year JGB yield was last up 1 basis point at 2.155%.

The yen also weakened after the speech, trading at around 159.395 per dollar, compared with a session high of 158.885. Traders who had positioned themselves for more hawkish comments from Himino moved to cover short positions in Japanese government bonds after the speech, helping push yields lower from their intraday peaks.

Markets now await BOJ Governor Kazuo Ueda's next signals, particularly at next week's G20 gathering of finance leaders. Any indication that the BOJ is becoming more confident about underlying inflation and wage growth could reinforce expectations for another hike.