BOJ Deputy Governor Himino signals readiness to raise borrowing costs

what happened

Japan's underlying inflation is quite close to the Bank of Japan's 2% target, and financial conditions still remain loose, Deputy Governor Ryozo Himino told parliament on Wednesday. His remarks point to a readiness to make borrowing more expensive. Higher fuel and raw material costs are lifting prices, while strong global demand for AI is also adding pressure through exports and capital spending.

Himino said medium- and long-term inflation expectations keep rising, and underlying inflation will likely converge toward levels consistent with the bank's price target. He noted that even after last month's rate increase, financial conditions remain accommodative, with real borrowing costs still low and bank lending growing strongly. "Delaying necessary adjustment to monetary support" could heighten inflation risks and harm the economy over the long run, he warned, calling for continued rate hikes.

why it matters

The comments from a senior policymaker strengthen expectations of further tightening by the Bank of Japan. For markets, this typically supports the yen and weighs on Japanese government bonds, since higher policy rates push up borrowing costs. Japanese rates remain low compared with other developed economies, so future moves could affect carry trades and the USD/JPY exchange rate.

market impact

Yen and JGBs: signals of further rate hikes support the yen and pressure bond prices

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