Himino signals rate rises as underlying inflation nears 2 percent
Bank of Japan Deputy Governor Ryozo Himino indicated the central bank will continue raising interest rates as underlying inflation approaches two percent. Speaking in Saitama on August 27, Himino stressed that financial conditions remain accommodative following June's rate rise to 1.0 percent.
Easing off the accelerator
Himino outlined that the BOJ needs to adjust monetary accommodation as underlying price growth approaches 2 percent.
Although headline inflation slowed in early 2026 due to government subsidies and lower food prices, consumer inflation is projected to exceed 2 percent in the second half of fiscal 2026.
Himino pointed to robust wage growth, tight labor conditions, and stronger foreign exchange pass-through as persistent drivers.
Global AI investment is also generating macroeconomic spillovers, with Japan's export prices rising 10 percent year-on-year in July on high semiconductor demand.
With real interest rates remaining negative, Himino warned that delaying rate adjustments risks future abrupt tightening.
Navigating external price shocks
The policy shift follows the BOJ's decision in June 2026 to lift the short-term policy rate to 1.0 percent, its highest level in 31 years.
Policymakers evaluated major external developments, including diminished supply disruption risks from the Middle East conflict despite oil price volatility.
Meanwhile, the yen's depreciation continues to squeeze small enterprise margins and elevate import costs.
Himino noted that transmission lags mean policy impacts take one to two years to peak across the broader economy.
Clear guidance behind polite rhetoric
Himino clearly signals that the BOJ will continue raising rates regardless of temporary headline dips.
Framing the 1.0 percent rate as still stimulative dismantles domestic political pushback against tightening.
The communication confirms that Japan's monetary normalization has entered an active phase.