The Deputy Governor of the Bank of Japan stated that further interest rate hikes are possible

Investing.com - Bank of Japan Deputy Governor Ryozo Himino said on Monday that as the central bank gradually shifts toward a more neutral monetary policy stance, it may continue to raise interest rates.

Speaking at a meeting in Kansai and Wakayama, Himino stated that the future core inflation rate could approach the Bank of Japan’s 2% target and noted that current inflation remains below the central bank’s goal.

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He also pointed out that so far, the BOJ’s rate hikes have had limited impact on the Japanese economy. Since early 2024, the central bank has raised rates four times, bringing the policy rate from negative territory to 0.75%.

“Currently, the inflation gap remains slightly negative, but is expected to approach zero in the future… Although the BOJ’s policy remains somewhat accommodative, it should gradually shift toward a more neutral stance through moderate rate hikes,” Himino said.

The Bank of Japan generally maintains its stance that interest rates will rise as economic growth and inflation progress according to its forecasts. However, recent weak domestic GDP and inflation data have raised questions about the bank’s room to raise rates.

The latest data is the Tokyo Consumer Price Index for February, which shows that the core inflation rate has fallen below the BOJ’s 2% annual target.

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