Bank of Japan deputy governor reaffirms readiness for more rate hikes
Summary
- Bank of Japan Deputy Gov. Ryozo Himino has backed the case for further interest-rate hikes if the economy and prices grow as expected, echoing recent comments from the central bank’s chief.
Bank of Japan Deputy Gov. Ryozo Himino has backed the case for further interest-rate hikes if the economy and prices grow as expected, echoing recent comments from the central bank’s chief.
Himino’s remarks on Wednesday suggest that the BOJ’s top officials are on the same page about the bank’s future policy path.
“The bank’s basic stance on the future conduct of monetary policy is that it will examine the impact of market developments and the July rate hike and that, if it has growing confidence that its outlook for economic activity and prices will be realized, it will adjust the degree of monetary accommodation," Himino said in a speech to business leaders in Yamanashi prefecture, located west of Tokyo.
That was in line with remarks from BOJ Gov. Kazuo Ueda, who was summoned to Parliament last week to explain the bank’s decision to raise interest rates in July to 0.25% from the previous range of 0% to 0.1%.
In Wednesday’s speech, Himino promised to monitor market developments “with the utmost vigilance" as they are still unstable, another point Ueda also mentioned last week.
The BOJ’s pledge to pursue more rate increases, together with concerns about a U.S. economic slowdown sparked by soft data, led to the rapid appreciation of the yen against the dollar and sharp falls in Japanese equities in early August.
Another BOJ deputy governor, Shinichi Uchida, recently said that the bank wouldn’t raise interest rates while markets are volatile.
Himino said the recent yen’s appreciation would help ease pressures on smaller companies, which have been suffering from higher import costs. While the yen’s rise could hurt exporters’ earnings overseas, the deputy governor said there hasn’t been a huge gap between the current foreign exchange rate and Japanese companies’ assumption rate.
According to the BOJ’s most recent Tankan corporate survey, large Japanese manufacturers are making their earnings projections based on the assumption that the dollar will trade at around Y142.68 in the current fiscal year ending in March 2025, compared with around 144.45 during Wednesday’s Tokyo trading.
Himino’s remarks didn’t seem quite so hawkish even though he is seen leaning that way generally, Maybank analysts wrote in a note, adding that the yen softened against the dollar after the comments but remained around recent levels. They expect the pair to trade sideways this week, within a range of 144.00 to 150.00. Data points in focus include Tokyo CPI due Friday, which may have implications for the BOJ’s tightening path, the analysts said.
With speculation growing over how much further the BOJ can raise interest rates, Himino said it would be difficult to pinpoint a specific number as Japan’ neutral interest rate, which is neither stimulative nor restrictive.
“Can a central bank infer the policy trajectory working backward from the neutral rate?" Himino said. “The economy is subject to various shocks and is constantly transiting from one state of imbalance to another. The trajectory toward a steady state cannot be a straight line and should be changing all the time."
Write to Megumi Fujikawa at megumi.fujikawa@wsj.com
