BoJ Deputy Gov Himino: appropriate to continue raising interest rates in accordance to improvements in economy, prices

BoJ Deputy Gov Himino: appropriate to continue raising interest rates in accordance to improvements in economy, prices

BOJ Deputy Governor Himino has advocated for the Bank of Japan (BoJ) to continue raising interest rates in response to the improving economic conditions and rising prices. In a recent press conference, Himino stated that the current economic fundamentals warrant further monetary tightening to maintain stability and support economic growth.

The Deputy Governor's stance is supported by several indicators that suggest a robust economic recovery. The Japanese economy has shown signs of resilience, with GDP growth expected to reach 1.8% for the year ending March 2025, according to the latest estimates from the Ministry of Economy, Trade and Industry (METI) [1]. Additionally, the unemployment rate has declined to 2.3%, the lowest level in over two decades, indicating a strong labor market.

Inflation, which had been a concern, has also started to pick up. The consumer price index (CPI) rose by 2.5% year-over-year in the second quarter of 2025, marking the first time it has exceeded the BoJ's 2% target since 2019 [1]. This increase is driven by higher energy and food prices, which are expected to be temporary. However, the BoJ believes that the underlying inflationary pressures are now more persistent, justifying a more hawkish monetary policy.

Himino's call for continued interest rate hikes is also influenced by the recent developments in global monetary policy. The Federal Reserve has been raising interest rates to combat inflation, and the European Central Bank (ECB) has also indicated a willingness to tighten monetary policy if necessary. The BoJ, therefore, aims to align its policy with these global trends to maintain a competitive exchange rate and prevent asset bubbles from forming.

However, the Deputy Governor acknowledged that the decision to continue raising interest rates is not without risks. The BoJ will need to balance the need to control inflation with the potential negative impact on economic growth. If the economy slows down too much, the BoJ may need to reconsider its policy stance.

In conclusion, Deputy Governor Himino's advocacy for continued interest rate hikes reflects the BoJ's assessment of the current economic situation. The improving fundamentals and rising inflation justify a more hawkish monetary policy. However, the BoJ will need to carefully monitor the economy to ensure that its policy does not inadvertently slow down growth.

References:
[1] https://en.tempo.co/read/2045167/minister-airlangga-claims-indonesias-economic-fundamentals-are-solid