In a speech to Japanese business leaders on Thursday, Bank of Japan (BOJ) Deputy Governor Ryozo Himino warned that the central bank must be ready to raise interest rates in a timely manner. Himino said a proactive approach will help avoid a sharp spike in inflation that could force the BOJ to implement abrupt, larger hikes in the future.
Focus on the 2% Target
Himino emphasized that if underlying inflation drifts above the BOJ’s 2% goal, the broader economy could suffer. “We should pay greater attention to upside risks to prices than in the past,” he told the audience. He called for thorough deliberations at each monetary‑policy meeting, keeping the inflation outlook front‑and‑center.
Balancing Growth and Price Stability
The deputy governor explained that adjusting still‑loose financial conditions through measured rate hikes would help channel capital toward investments with genuine growth potential. With underlying inflation already edging toward the 2% mark, the BOJ must focus on stabilising price growth around that level.
Weak Yen as an Inflation Driver
Himino highlighted the weak yen as a key factor that could accelerate price pressures. A depreciating currency makes imported goods more expensive, feeding into overall inflation. He said the BOJ will closely monitor exchange‑rate movements as part of its policy toolkit.
Timely Action Over Reactive Measures
“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,” Himino said. He stressed that any decision will be based on a broad set of data, including economic growth, price developments and the state of financial conditions.
Implications for the Global Economy
While the remarks were directed at a domestic audience, they carry weight for international markets that watch the BOJ’s policy stance closely. A shift toward tighter monetary policy could influence global interest‑rate expectations, currency flows and investment decisions.
Himino’s comments come as central banks worldwide grapple with the challenge of balancing inflation control against the need to support economic recovery. The BOJ’s willingness to act decisively, if warranted, signals a commitment to maintaining price stability while preserving the conditions needed for sustainable growth.
Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.
