Bank of Japan (BoJ) Deputy Governor Ryozo Himino stated on Thursday that the central bank will make decisions on interest rates by balancing the need to gather information on the economy and financial conditions with the necessity to act in a timely manner to avoid lagging behind inflation trends [1]. Himino emphasized that the BoJ does not require complete information on economic, price, and financial developments before shifting policy, but will consider the fact that underlying inflation is nearing the 2% target when making policy decisions [1].
Himino also noted that there are no specific distortions in the Japanese Government Bond (JGB) market, allowing the BoJ to continue with its current bond tapering plan [1]. At the time of the statement, the USD/JPY currency pair was up 0.02% on the day at 159.35, indicating a mild market reaction to the comments [1].
The BoJ has recently moved away from its ultra-loose monetary policy, which had been in place since 2013 and included measures such as Quantitative and Qualitative Easing (QQE), negative interest rates, and yield curve control. In March 2024, the BoJ lifted interest rates, marking a retreat from this stance in response to inflation exceeding the 2% target and rising salaries in Japan [1].
Himino's remarks suggest that the BoJ remains cautious but is prepared to adjust policy as necessary, taking into account both economic data and inflation risks [1].
CONCLUSION
BoJ Deputy Governor Himino's comments indicate a balanced and data-driven approach to future rate decisions, with a focus on inflation nearing the 2% target. The market response was muted, as reflected in the slight uptick in USD/JPY. The BoJ's ongoing policy normalization remains contingent on evolving economic and inflation data.