BoJ’s Himino: At next week's policy meeting, board will likely to debate whether to hike rates

Bank of Japan (BoJ) Deputy Governor Ryozo Himino said on Tuesday that “at next week's policy meeting, board will likely to debate whether to hike rates and make a decision.”

Additional comments

In conducting monetary policy, it is necessary to pay close attention to short-term developments in economic activity, prices, and financial conditions.

Inflation expectation has risen from below one percent to around one and half.

BoJ aims to achieve the price stability target of 2 percent in a sustainable and stable manner.

This target cannot be achieved unless actual inflation rate declines as envisioned.

If inflation expectation does not rise toward 2%, the actual inflation rate will eventually fall below 2%, and it would therefore not be possible to achieve target in sustainable and stable manner.

So far, developments in prices and inflation expectation seem to have been largely on path.

If this outlook will continue to be realised, BoJ will raise the policy interest rate accordingly and adjust degree of monetary easing.

There are risk factors at home and abroad, both upside and downside.

Domestically, close attention needed on outlook for wage increases in FY2025.

Raising wages would by no means be a simple matter.

Currently updating outlook for Japan's economic activity and prices for this year onward by scrutinizing the latest data available and other information.

Outlook to be presented in BoJ’s outlook report next week.

In guiding policy, determining timing of policy change is difficult and important.

It is not normal state for real rates to stay negative for prolonged period once shock, deflationary factors dissipate.

We can foresee future where japan emerges from state where real rates are in deeply negative territory.

As for near-term policy guidance, we need to look closely at short-term economic, price and financial developments.

Japan's inflation expectations have gradually heightened, now around 1.5%.

Japan's economy is roughly moving in line with our scenario projecting underlying inflation, inflation expectations to both move around 2%.

Undesirable for central banks to intentionally cause surprise in guiding monetary policy, except for when there is a crisis.

We don't side with the view central banks must communicate in a way that allows markets to fully price in outcome of our policy meeting in advance.

Not possible to telegraph monetary policy decision as outcome of policy meeting depends on discussions at meeting.

Acknowledge there is room for improvement in communication with markets.

Market reaction

The Japanese Yen came under renewed selling pressure on these comments, driving USD/JPY back to test 158.00 before reversing sharply to near 157.50, where it now wavers.