BOJ deputy governor Himino calls for ’timely’ rate hike

Bank of Japan Deputy Governor Ryozo Himino emphasized the necessity for timely interest rate increases to address mounting inflation risks in Japan on Thursday. Himino stressed the importance of thorough deliberations on price pressures at each monetary policy meeting, refraining from providing explicit indications about the exact timing of the subsequent rate hike.

Inflation was driven by factors such as the Middle East conflict, high fuel prices, and surging chip costs due to global demand for artificial intelligence. A weaker yen could also exacerbate inflation at a faster rate than previously observed, Himino noted, highlighting the significance of exchange-rate fluctuations in guiding policy decisions.

The BOJ's primary concern should be maintaining inflation around the 2% target; if underlying inflation deviates above this threshold, it could adversely impact the economy. Himino pointed out that the September policy meeting is likely to occur, and the central bank is contemplating more aggressive rate hikes beyond the current frequency of approximately twice a year.

He countered the argument that further rate hikes might harm a fragile economy, asserting that fine-tuning still-loose financial conditions would facilitate more efficient asset allocation towards investments with growth potential. The central bank's aim is to stabilize price growth around the 2% level to prevent a sudden surge in inflation and future steep rate hikes, ultimately benefiting smaller businesses.