BOJ Deputy Governor Sees Timely Rate Hikes Needed to Address Inflation Risks

Bank of Japan Deputy Governor Ryozo Himino emphasized the need for 'timely' interest rate hikes, citing concerns about inflation overshooting its 2% target. Speaking at a news conference in Urawa, Japan, on August 27, Himino stressed that the BOJ must balance gathering information and acting quickly to avoid being behind the curve on inflation.

According to Himino, underlying inflation is approaching 2%, which he sees as a key indicator for future monetary policy decisions. He acknowledged that the BOJ's past meetings have not seen significant changes in its views on the economic and price outlook, with weak second-quarter GDP data attributed to technical factors.

Himino highlighted mounting inflationary pressures caused by rising fuel costs from the Middle East conflict, robust global AI demand, and high import prices due to a weak yen. He noted that Japan has entered a phase where the BOJ must consider the possibility of underlying inflation exceeding its 2% target.

In his speech, Himino said, 'If underlying inflation deviates above our 2% target, that would have an adverse impact on the economy.' He also stated that the BOJ should pay greater attention to upside risks to prices than in the past. Himino's views were seen as hawkish and consistent with market expectations for a near-term interest rate hike.