Reuters reported Oct. 21 that Bank of Japan Deputy Governor Ryozo Himino warned that waiting too long to withdraw monetary support could raise inflation risks and ultimately hurt Japan’s economy.
At a parliamentary hearing, Himino assessed underlying inflation as close to the BOJ’s 2% target. That was his assessment, not a published inflation reading. He cited low interest rates after accounting for inflation and continued growth in bank lending as signs that financial conditions remained accommodative following September’s rate increase, Reuters reported. The BOJ describes underlying inflation as the price trend expected to persist after temporary factors fade; Himino has said it cannot be measured precisely.
The BOJ voted 7-2 on Sept. 18 to lift its overnight rate target from around 1.0% to around 1.25%, effective Sept. 24. Two members dissented, questioning whether economic and price conditions warranted the increase. The bank said further moves would depend on economic activity, prices and financial conditions.
In its July outlook, the BOJ projected consumer prices excluding fresh food would rise 2.5% in fiscal 2026, 2.4% in fiscal 2027 and 2.0% in fiscal 2028. The projections are forecasts, not current inflation readings. The bank cited oil prices, exchange rates and demand related to artificial intelligence among the factors shaping its outlook, and warned underlying inflation could exceed its target.
The BOJ’s next policy meeting is scheduled for Oct. 29-30, and the bank plans to publish an updated outlook on Oct. 30.
