Bank of Japan deputy chief calls for more rate hikes as market bets on September lift
Ryozo Himino cites price risks from higher crude oil prices stemming from the Middle East conflict.
On August 27, Bank of Japan deputy governor Ryozo Himino advocated for further interest rate hikes, highlighting the depreciation of the yen's impact on inflation. Speaking at a business event in Saitama, Himino emphasized that rising crude oil prices due to the Middle East conflict, climbing semiconductor prices from increased global AI demand, and the yen's decline were contributing factors.
He stated that timely rate increases would help curb inflation and prevent abrupt future hikes, benefiting small and medium-sized businesses and mortgage borrowers. At a press conference, Himino did not disclose specific details about the timing or magnitude of the next rate hike but assured that the central bank would consider it at each meeting, including the upcoming one on September 17-18, based on price and economic activity trends.
Following Governor Kazuo Ueda's call for accelerated rate hikes in July, financial markets had begun to anticipate a September increase. Prior to this, the market had predicted a rate hike every six months, with a December hike following the June increase. In July, Japan and the US jointly intervened in the currency market to prevent the yen's further decline, leading to further expectations of a September hike.
The yen's depreciation is partly due to the significant US-Japan interest rate differential. Some market participants believe that a BOJ rate hike, combined with the US Federal Reserve delaying its own hike, would boost yen buying by reducing the interest rate spread. This move would have sent the yen surging to the 157 yen level after falling to 163.99, its weakest level since 1986, but it has since partially recovered.
The yen has faced selling pressure due to concerns over Prime Minister Sanae Takaichi's expansionary fiscal policy and its funding. Himino stressed that monetary policy does not target exchange rates, but the yen's depreciation does influence economic activity and prices, and the exchange rate's impact on prices is becoming more pronounced.
Written by urgent.news from Straits Times Business's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
