BoJ’s Himino: Market sees increases in long-term rates as reflecting global inflation worries
Bank of Japan (BoJ) Deputy Governor Himino said on Tuesday that the market sees increases in long-term interest rates as reflecting global inflation worries. Himino further stated that the central bank will consider timing and pace of adjustment while monitoring how Middle East developments affect Japan economy, price and examining likelihood of realizing the baseline scenario.
Key quotes
Market views rises in long-term interest rates reflect global concerns about inflation.
BoJ will conduct monetary policy appropriately to achieve inflation target stably, sustainably.
Will access bond market situation, market functionality while listening to market participants as we review bond tapering plans.
Our economic outlook can change depending on Middle East situation.
BoJ will continue to raise policy rate, adjust degree of monetary accommodation according to economic activity, prices, financial conditions.
Wll consider timing and pace of adjustment while monitoring how Middle East developments affect Japan economy, price and examining likelihood of realising baseline scenario.
Market reaction
At the time of press, the USD/JPY pair is up 0.04% on the day at 159.98.
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
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