Bank of Japan Deputy Governor: Gradual Shift to Neutral Policy Expected Through Continued Rate Hikes

Bank of Japan Deputy Governor Shinichi Himino stated on Monday that the central bank is expected to gradually shift towards a more neutral monetary policy stance through continued interest rate hikes. He pointed out that previous rate hikes have had a limited impact on the Japanese economy, and although the core inflation rate is steadily rising, it is still too early to assert that the 2% target has been achieved. Himino noted that the current inflation gap is slightly negative, but it may approach zero in the future, indicating that policy remains somewhat accommodative but will gradually turn neutral. He did not comment on the pace or timing of rate hikes, emphasizing that decisions must be based on a comprehensive assessment of data. The market currently widely expects that the Bank of Japan may raise rates from the current 0.5% to 0.75% as early as March or April. Analysts have pointed out that the US-Iran crisis could push up crude oil prices, intensifying inflationary pressures and adding to the Bank of Japan's policy challenges. Himino also stated that it is crucial to closely monitor market trends, but the central bank should not overreact to market volatility and should instead earn market trust through prudent policies.