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BoJ’s Himino: Will raise rates if economy, prices move in line with forecast

Bank of Japan (BoJ) Deputy Governor Ryozo Himino said on Thursday, the central bank “will raise rates if economy and prices move in line with forecast.

Additional comments

BoJ continues to support economy with accommodative monetary environment.

Still some distance for Japan to enter world of positive real interest rate.

When shock hits the economy or various deflationary factors remain, it might be necessary to keep real rates in negative territory.

If shocks, deflationary factors disappear, it's not normal for real rates to remain clearly negative for a prolonged period.

Level of real interest rate that is neutral to economy is affected by various factors, not just demographics.

Ideal outlook for Japan would be for economic growth to boost wages, corporate profits, thereby leading to moderate inflation.

There are questions as to why estimated output gap has not improved markedly despite real interest rates remaining clearly negative.

Market reaction

At the time of writing, USD/JPY is picking up fresh bids to trade near 154.75, still down 0.28% on the day.

Author

Dhwani Mehta

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

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