Bank of Japan (BoJ) Deputy Governor Ryozo Himino stated on Tuesday that the BoJ board is likely to discuss a potential rate hike at next week’s policy meeting.
In his remarks, Himino emphasized the importance of closely monitoring short-term economic activity, price trends, and financial conditions when conducting monetary policy. He noted that inflation expectations have risen from below 1% to approximately 1.5%. The BoJ’s goal remains to achieve the 2% price stability target in a sustainable and stable manner. However, he warned that without a rise in inflation expectations toward 2%, the actual inflation rate would eventually fall short of this target, complicating efforts to maintain price stability.
Himino also acknowledged both upside and downside risks to Japan’s economy, with particular attention needed on wage growth projections for fiscal year 2025. He emphasized that raising wages is not a simple task and that the BoJ is currently updating its outlook for economic activity and inflation, which will be presented in next week’s BoJ outlook report.
Regarding policy changes, Himino noted that while determining the timing of such decisions is crucial, it is not normal for real interest rates to remain negative for an extended period once deflationary factors subside. He stated that Japan could emerge from the period of deeply negative real rates, but this will depend on ongoing economic developments.
On the topic of policy guidance, Himino stressed that the BoJ does not seek to surprise markets with sudden changes, except in times of crisis. He acknowledged that there is room for improvement in communication with markets but maintained that the outcome of the BoJ’s policy meetings is ultimately determined by board discussions.
Market Reaction
The Japanese Yen weakened following Himino’s comments, with USD/JPY briefly testing the 158.00 level before reversing to hover near 157.50.
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