(Bloomberg) — The Bank of Japan will continue to raise its benchmark rate, unwinding easy policy settings, if the economy performs in line with projections, Deputy Governor Ryozo Himino said, signaling no change to the bank’s stance after the nation installed a new government.
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If the outlook for the economy and inflation is realized, “the bank will accordingly continue to raise the policy interest rate,” Himino said in a speech Thursday at a Bloomberg conference in Tokyo. “The policy board will carefully assess incoming data, the evolving outlook, and the balance of risks at each meeting. We are not on a preset course.”
Himino’s comments came in the first public speech by a board member since newly installed Prime Minister Shigeru Ishiba last week waded into monetary policy by saying conditions aren’t right for a rate hike at this time. Himino’s remarks, some of which came verbatim from the July policy statement, indicate the bank is sticking with its policy trajectory.
At the same time, Himino indicated the need to keep monitoring the global economy further in a sign he sees no rush to raise borrowing costs when the board next meets at the end of the month. US employment gauges and consumption trends and Chinese consumer spending “may deserve more attention than before,” he said.
On his first full day as premier, Ishiba emerged from a meeting with BOJ Governor Kazuo Ueda and told reporters the economy isn’t ready for a hike right now. Although the remark was in line with what Ueda has said — and indeed Ishiba later clarified that he meant to convey alignment — the appearance of governmental pressure on the central bank to refrain from hikes sparked a rout in the yen as traders factored in a longer policy pause.
Most economists expect the BOJ to hold its settings steady when it next sets policy on Oct. 31. Eiji Maeda, a former executive director at the BOJ, said Tuesday he expects the bank to wait until January before hiking, as authorities monitor the US election, wage hike momentum and service price trends.
The deputy governor cited a number of real interest rates that authorities can assess, and in Japan’s case they’re all negative to varying degrees, indicating there’s room for further rate hikes. The timing for the action will depend on incoming data, as the bank deliberates on a meeting-by-meeting basis, he said.
Himino noted that the bank came under criticism for poor communications after its July 31 rate hike surprised traders and was partly blamed for sparking turmoil in global financial markets in early August.
“I also remember being baffled by the ‘BOJ speak’ when I joined the bank a year and a half ago,” Himino said. “Today, I beta tested an approach to deciphering a statement of the bank, thinking it might contribute to better communication.”
“There’s so silver bullet in better communication” or to improving communications, he said, noting that there’s a strong will within the bank to endeavor to do so.
Himino expressed optimism about Japan’s outlook.
“I would argue that we are entering a new era,” he said. “Japanese business, Japanese market and the Japanese economy have started to move again.”
(Updates with more comments from speech)
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