Bank of Japan Deputy Governor Ryozo Himino said policymakers must act in a timely manner to avoid falling behind on inflation, signaling a potential rate hike as early as September.
Speaking in Urawa on Thursday, Himino emphasized the need to balance data dependency with prompt policy adjustments, noting that underlying inflation is approaching the BOJ’s 2% target. He cautioned that a sustained overshoot could harm the economy, urging greater attention to upside price risks. "If underlying inflation deviates above our 2% target, that would have an adverse impact on the economy," he said. "We should pay greater attention to upside risks to prices than in the past."
The BOJ raised its key interest rate to a 31-year high of 1% in June, its second hike this year, following a period of steady policy in July. Wholesale inflation surged to 7.2% year-on-year in July, driven by rising fuel costs linked to Middle East conflicts, robust global AI demand, and a weak yen that inflated import prices. While second-quarter GDP data showed weakness, officials attributed it to technical factors rather than a broader slowdown.
Senior Economist Shotaro Mori of SBI Shinsei Bank noted that Himino’s remarks did not rule out a September rate hike, describing the tone as hawkish. "The September meeting is likely to be live," Mori said, aligning with market expectations for a potential move next month. The BOJ has indicated it will assess economic data at each policy meeting, with Himino stressing the importance of in-depth deliberations to avoid abrupt future adjustments.
Himino also framed rate hikes as a measured easing of accommodative financial conditions, stating, "As we are still pressing on the accelerator, or keeping financial conditions accommodative, I believe we will need to ease off in a timely manner through rate hikes."
