BOJ’s Himino signals more hikes, flags growing upside inflation risk
Himino's remarks read as a clear reaffirmation of the BOJ's tightening bias, with his explicit statement that the bank should continue raising rates and adjusting the degree of accommodation likely to keep September hike expectations firmly in play. His comment that the board must be more mindful of upside price risks than ever before, paired with his framing of both AI-driven demand and yen weakness as inflationary forces, strengthens the hawkish read markets had been positioning for ahead of the speech. The acknowledgment that supply disruption risk from the Middle East conflict has diminished, thanks to near complete alternative crude procurement, removes one of the more dovish caveats that had previously tempered rate hike conviction. Yen strength and a modest lift in JGB yields would be the natural market reaction to this combination of signals, though Himino's own caution that policy effects take time to filter through to prices suggests the BOJ is unlikely to rush.
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Himino delivered a distinctly hawkish message, saying the BOJ should keep raising rates and watch upside inflation risks more closely than ever before.
Summary:
- Himino said accommodative monetary conditions remain positive for the economy, but reiterated the BOJ should continue raising the policy rate and adjusting the degree of accommodation as conditions warrant.
- He said rising global AI demand is pushing up both economic activity and prices, citing surging Japanese export prices for memory chips and semiconductor equipment.
- He said yen depreciation is working to push up inflation, alongside AI-driven demand.
- Himino said the board must be mindful of upside price risks more than ever before and pay greater attention to them than in the past.
- He said it is important to stabilize underlying inflation around the 2% target, and that a deviation above target would hurt the economy.
- He noted policy will be debated meeting by meeting with these risks in mind, and cautioned that monetary policy takes time to affect prices.
- Separately, he said risks of Middle East related supply chain disruption have diminished, with Japan now sourcing nearly 100% of required crude from alternative channels.
Bank of Japan Deputy Governor Ryozo Himino delivered a hawkish assessment of Japan's economic outlook on Thursday, telling local business leaders in Saitama that the central bank should continue raising its policy interest rate and adjusting the degree of monetary accommodation in line with developments in economic activity, prices and financial conditions.
Himino said the bank must be mindful of upside price risks more than ever before and should pay greater attention to those risks than it has in the past. He said it is important to stabilize underlying inflation at a level around the BOJ's 2% target, warning that a deviation above that level would have an adverse impact on the economy. He added that the board will debate policy at each meeting with these considerations in mind, though he cautioned that monetary policy takes time to work through to prices, drawing a comparison to a bus whose speed changes only gradually in response to the accelerator and brake.
On the drivers of inflation, Himino pointed to two forces working in the same direction. Rising global AI related demand is pushing up both economic activity and prices, he said, pointing to Japanese export price gains concentrated in memory chips, precision instruments and semiconductor manufacturing equipment, with spillover effects reaching sectors as varied as copper mining and inbound tourism. Separately, he said the weaker yen is also working to push inflation higher, even as accommodative financial conditions continue to provide broad support to the economy.
Himino also addressed the Middle East conflict, one of the four key factors he identified as shaping the current outlook alongside AI demand, the yen and financial conditions. He said earlier concerns over supply chain disruption have significantly diminished, noting that Japan had secured close to 100% of its required crude oil through alternative procurement channels by July, including a sharp increase in sourcing from the United States. Still, he noted the conflict continues to exert downward pressure on economic activity while pushing prices upward, alongside a renewed escalation in tensions during July.
Taken together, the speech reinforces the picture of a BOJ board increasingly focused on the risk of inflation running persistently above target, rather than the risk of a premature tightening derailing the recovery, a shift in emphasis that is likely to keep alive market expectations for further policy rate increases in the months ahead.
This article was written by Eamonn Sheridan at investinglive.com.提供 MainLink：Investinglive RSS Breaking News Feed
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