BOJ deputy governor vows more rate hikes as inflation risks mount

BOJ Deputy Governor Himino Signals Continued Rate Hikes Amid Inflation Concerns

Bank of Japan Deputy Governor Ryozo Himino told parliament on Friday that the central bank will continue raising interest rates, warning that underlying inflation risks overshooting its 2% target. The remarks came days after the BOJ raised its benchmark rate to 1% — the highest level since 1995.

Inflation Risks Drive Hawkish Stance

“There is a risk underlying inflation may deviate upward from our target,” Himino said while explaining the rationale behind the BOJ’s decision earlier in the week. He noted that wholesale inflation was accelerating at a “somewhat fast pace” as companies pass on rising costs stemming from the Middle East conflict, which could lead to broader price increases.usnews

When asked about the weakening yen, Himino said the BOJ was closely monitoring currency movements as a key factor affecting the economy and inflation. In a March parliamentary session, Himino had warned that “changes in the exchange rate have a more significant effect on price movements than they did previously,” noting this mechanism could affect inflation expectations and the core inflation rate.channelnewsasia

Historic Rate Decision

The BOJ raised its policy rate to 1% from 0.75% on June 16 in a 7-1 vote, with board member Toichiro Asada dissenting. Governor Kazuo Ueda missed the meeting due to hospitalization for a hepatic cyst infection, leaving Deputy Governor Himino to chair the session. It was the central bank’s first hike since December 2025.japantimes

The decision came as Japan’s wholesale inflation hit 6.3% in May — the highest since March 2023 — driven by elevated crude oil prices from the U.S.-Iran conflict and a yen trading above ¥160 to the dollar.japantimes

Markets Expect Further Tightening

A Reuters poll conducted before the June meeting found that 94% of economists surveyed expected the rate to reach 1% by the end of June, with nearly all anticipating at least one more hike to 1.25% by year-end. Deputy Governor Shinichi Uchida said after the June 16 decision that the BOJ will “likely continue raising its policy rate depending on economic conditions and prices”.usnews

Japan’s economy has shown resilience despite energy headwinds, with corporate profits remaining robust and wages continuing to rise. Still, the Mainichi Shimbun noted in an editorial that the rate increase alone was “insufficient to effectively control inflation,” with the yen failing to appreciate following the announcement.mainichi