BOJ's Himino Signals More Hikes Amid Growing Inflation Risks

Bank of Japan Deputy Governor Ryozo Himino delivered a hawkish message on Thursday, emphasizing the need for further interest rate hikes and increased attention to upside inflation risks.

Himino stated that the BOJ should continue raising its policy interest rate and adjusting the degree of monetary accommodation in line with developments in economic activity, prices, and financial conditions.

The Deputy Governor cited two key drivers of inflation: rising global AI-related demand and yen weakness. He noted that Japan's export price gains are concentrated in memory chips, precision instruments, and semiconductor manufacturing equipment, with spillover effects reaching sectors as varied as copper mining and inbound tourism.

Himino also addressed the Middle East conflict, stating that earlier concerns over supply chain disruption have diminished due to near-complete alternative crude procurement. However, he cautioned that the conflict continues to exert downward pressure on economic activity while pushing prices upward.