BoJ’s Himino says policy should gradually move toward neutral stance with moderate rate hikes

Bank of Japan (BoJ) Deputy Governor Himino said on Monday that the BOJ policy remains somewhat accommodative but should gradually shift to a more neutral stance through moderate policy rate hikes. 

Key quotes

BoJ's goal is to maintain price stability by avoiding both excessive inflation and deflation, thereby keeping the economy on a sustainable growth path. 

If our estimates are correct, we can infer that the Japanese economy is neither overheating nor stagnating. 

Impact of past rate hikes on the economy is limited. 

We need to look at market moves carefully however being swayed too much by market moves could put us under attack from speculators. 

Many people in Japan still do not believe the economy is especially strong at this point. 

Responding to inflation driven by supply shocks could disrupt GDP. 

When addressing temporary supply shocks, it is possible that the effects of the shocks may have already dissipated by the time the policy measures take effect. 

It is therefore more prudent to confirm underlying inflation when responding to supply shocks. 

Inflation gap remains slightly negative currently but is expected to approach zero in the future. 

BOJ policy remains somewhat accommodative but should gradually shift to a more neutral stance through moderate policy rate hikes. 

Market reaction

At the time of press, the USD/JPY pair was up 0.05% on the day at 156.25.