Japan's BOJ Deputy Governor Signals Further Rate Hikes
Despite last week's rate increase, Japan's real interest rates remain negative, according to Deputy Governor Ryozo Himino. The Bank of Japan (BOJ) will continue raising rates if its economic outlook materializes.
Himino, speaking at a conference in Tokyo, stated that the current accommodative monetary environment will be maintained as long as real rates remain negative. He emphasized that if the BOJ's economic and price outlooks are met, rates will be hiked accordingly.
Himino's comments reinforce the BOJ's stance on future rate hikes. He asserted that it is not sustainable for real rates to remain negative for an extended period. However, he suggested a gradual pace of hikes, emphasizing the goal of transitioning Japan toward positive rates alongside economic growth and productivity gains.
Before this month's rate hike, Himino played a key role in preparing markets for BOJ action. His speeches are closely watched by BOJ observers, providing insights into the leadership's thinking.
Himino also highlighted the significant changes in Japan's economic landscape since the early 2000s, noting shifts in household and business balance sheets. This, he believes, means that the return to pre-2008 policy rates may have different economic implications compared to the past.
In addition to the rate hike, the BOJ took steps to normalize its balance sheet last week. It ended a key lending program, which is expected to reduce its balance sheet by around 10% over the next few years.
Most analysts surveyed by Bloomberg anticipate the BOJ's next rate hike to occur in July. However, some have projected a possible hike as early as April under a risk scenario.