BoJ's Himinno: Need to keep watching asset prices

BoJ's Himinno: Need to keep watching asset prices

BOJ’s Himino Emphasizes Ongoing Monitoring of Asset Prices Amid Gradual Rate Hikes
Bank of Japan (BoJ) Deputy Governor Ryozo Himino has reiterated the central bank’s commitment to gradually raising interest rates while underscoring the need to closely monitor asset prices amid evolving economic conditions. Speaking on March 1, 2026, Himino stated that the BoJ "should gradually shift to a more neutral stance through moderate policy rate hikes," though he did not specify a timeline for further increases according to his remarks. The remarks align with the BoJ's broader strategy to normalize monetary policy after years of ultra-loose settings, even as inflation remains below its 2% target.

Himino highlighted that the economic impact of recent rate hikes—most recently to 0.75% in December 2025—has been limited so far, with financial conditions still broadly accommodative. This cautious approach reflects concerns about Japan's fragile economic recovery, including persistent labor shortages and structural demographic challenges. However, he acknowledged that underlying inflation has been "steadily rising," signaling a potential shift in the BoJ's inflation outlook.

The BoJ's October 2025 Financial System Report underscores the importance of monitoring asset prices, particularly in stock and real estate markets. The report notes that Japanese stock prices have shown volatility amid global trade policy uncertainties, while real estate prices have risen sharply in major metropolitan areas due to supply constraints and strong demand. Although current valuations remain near historical averages, the report warns that a sudden shift in market sentiment or policy developments could trigger corrections, particularly in real estate markets where banks' exposures are growing.

Himino's comments also highlight the BoJ's awareness of global risks, including geopolitical tensions and the potential for rapid unwinding of investment positions by foreign non-bank financial intermediaries, such as hedge funds according to the report. These factors could amplify volatility in Japanese financial markets, necessitating vigilant oversight.

As the BoJ prepares for its next policy meeting on March 18–19, the balance between tightening monetary policy and safeguarding financial stability remains a key challenge. Himino's emphasis on asset price monitoring reflects the central bank's dual mandate to manage inflation while mitigating risks to the broader economy.