BOJ Deputy Governor Warns of Upside Inflation Risks Ahead of Rate Hike Decision

Bank of Japan Deputy Governor Ryozo Himino emphasized the need for timely rate hikes to avoid adverse effects on the economy if underlying inflation overshoots the 2% target. Speaking at the Saitama Prefecture Financial and Economic Forum, Himino stated that 'we are in a situation where the accelerator pedal remains pressed,' referring to accommodative financial conditions.

Himino also noted that a weaker yen could push up prices at a faster pace than in the past, and that exchange rate fluctuations are one of the key factors to monitor in policy management. He expressed the view that adjusting accommodative financial conditions through rate hikes would lead to more efficient allocation of assets toward investments with growth potential.

The BOJ has raised its policy rate to 0.75% at its July meeting, and Governor Kazuo Ueda has signaled readiness to proceed with additional hikes if the economy and prices move in line with projections. Market participants widely expect the BOJ to raise rates at its September Monetary Policy Meeting.