BoJ Deputy Governor Ryozo Himino said on Thursday, at a meeting with local leaders in Saitama that policy rates should continue to rise as underlying inflation approaches 2% and financial conditions remain accommodative. Himino said “the Bank should continue to raise the policy interest rate and adjust the degree of monetary accommodation,”. He also stressed that June’s increase to 1% was “an adjustment in the degree of monetary accommodation, not a tightening.” He warned that policymakers now need to pay greater attention to upside inflation risks as the economy moves closer to sustained 2% inflation.
Exchange rates featured prominently in that assessment. Himino stressed that “monetary policy does not target exchange rates, but exchange rates have an impact on economic activity and prices,” adding that pass-through from currency moves to prices “seems to be getting stronger.” Weak Yen can support exporters and inbound tourism, but it also raises import costs, consumer prices and pressure on household real incomes. More importantly for policy, stronger pass-through means persistent Yen depreciation can lift underlying inflation through expectations even if BoJ does not target exchange rate itself.
Himino argued that timely normalization would reduce risk of having to tighten more abruptly later, saying “raising rates in a timely manner will help avoid inflation acceleration and abrupt rate hikes in the future.” His message therefore reinforces a hawkish BoJ bias: further hikes are likely if inflation continues to firm, while Yen weakness matters increasingly through its inflation transmission rather than as a standalone policy objective. Timing will remain data-dependent, but Himino’s framing suggests debate has shifted from whether BoJ should normalize further to how quickly it should do so.
Key Takeaways
- BoJ Deputy Governor Ryozo Himino said “the Bank should continue to raise the policy interest rate and adjust the degree of monetary accommodation.”
- He stressed that June’s increase to 1% was “an adjustment in the degree of monetary accommodation, not a tightening,” implying policy still remains accommodative.
- Himino said “monetary policy does not target exchange rates,” but acknowledged exchange rates affect both economic activity and prices.
- He added that exchange-rate pass-through “seems to be getting stronger,” making weak Yen more relevant to inflation and BoJ’s reaction function.
- Himino warned that timely rate increases can help avoid “inflation acceleration and abrupt rate hikes in the future.”
- His comments reinforce a hawkish normalization bias, with weak Yen adding to inflation pressure even though BoJ is not explicitly targeting currency.
