Bank of Japan Deputy Governor Shinichi Himino delivered another reminder today that the central bank is still moving toward tighter policy, even as the Middle East crisis complicates the outlook for inflation, bond markets, and Japan’s economy. Himino acknowledged that global bond yields are rising because of “global concerns about inflation,” but stressed the BoJ will continue adjusting policy to achieve its inflation target “stably, sustainably.”
The most important signal for markets was that the BoJ has not abandoned its tightening bias despite the recent geopolitical turmoil. Himino said the central bank “will continue to raise policy rate” and adjust monetary accommodation according to economic and price conditions. However, he also made clear that policymakers are becoming increasingly sensitive to how oil prices and regional instability could affect Japan’s fragile recovery.
That caution was especially visible in his comments on future tightening pace and bond tapering plans. Himino said the BoJ would “consider timing and pace of adjustment while monitoring how Middle East developments affect Japan economy.” He also emphasized that policymakers are carefully reviewing bond market functionality while listening to market participants.
