Ryozo Himino inflation overshoot risk moved into focus after the Bank of Japan deputy governor said delayed policy changes could let prices rise past target.
Himino said before the Diet that waiting too long to adjust monetary easing could cause a major overshoot in inflation. He also said high oil prices have passed through to consumer goods at a fast pace. As a result, price pressure has spread through wholesale and retail markets.
He added that the recent easing in Middle East tensions matches the Bank of Japan’s April economic outlook. However, he said the bank remains alert to inflation risks. Meanwhile, he said easy financial and monetary conditions should stay in place for the time being.
Ryozo Himino Inflation Overshoot Warning
Himino said the Bank of Japan will watch closely how policy rate hikes affect households and local businesses. He pointed in particular to the impact on domestic sectors as borrowing costs rise. Therefore, the bank plans to balance price stability with the wider economy.
He also warned that a late response on policy could force sharper rate hikes later. That risk, he said, would come if inflation breaks above the 2% target. Notably, his remarks followed the bank’s recent benchmark rate hike to 1%.
Oil Price Pass-Through Stays in View
Himino said the pass-through from elevated oil prices has advanced relatively quickly. Because of that, the bank is tracking how cost pressure reaches downstream goods. Additionally, he said the bank will keep watching how households and small businesses absorb those effects.
His comments paired a warning on inflation with a signal that easy conditions will remain for now. However, he made clear that the Bank of Japan sees a risk in delaying needed policy adjustments.
You can access our other news on Forex markets and global market developments here.
