(Aug 28): Deputy governor Ryozo Himino said the Bank of Japan (BOJ) will raise interest rates as long as inflation moves in line with the bank’s view, underscoring the central bank’s essentially unchanged stance following ructions in the financial markets earlier in the month.

The BOJ’s basic stance “is that it will examine the impact of market developments and the July rate hike”, Himino said in a speech to local business leaders in Yamanashi, central Japan, on Wednesday. “If it has growing confidence that its outlook for economic activity and prices will be realised, it will adjust the degree of monetary accommodation.”

Himino’s comments reinforce the BOJ’s message that another rate hike remains on the table, keeping the yen under pressure a few days after the US Federal Reserve signalled there will be a rate cut next month. The deputy chief’s speech is likely to support many BOJ watchers’ forecast that another rate increase is likely by January. 

At the same time, Himino made comments suggesting that a rate hike isn’t imminent in the speech, and at a press conference in the afternoon. 

“The first job we must do is to watch financial markets with an extremely high sense of urgency, as I think they remain unstable,” Himino told reporters. “Financial markets at home and abroad can of course affect the likelihood”of whether the inflation outlook will be realised.  

The comments are identical to what governor Kazuo Ueda said repeatedly in a parliamentary hearing last Friday, suggesting that the bank won’t be rushing to raise borrowing costs from 0.25% in its next policy meeting in September.   

The yen weakened after Himino’s remarks, trading at around 144.4 against the dollar in the mid-afternoon in Tokyo, after rising as high as 143.69 on Wednesday morning.

Himino, a former top bureaucrat at the Financial Services Agency, is the last of the three top BOJ leaders scheduled to speak publicly this month. The central bank surprised markets with its hawkish signals at the end of July, in a move that contributed to a global market rout that sent the Nikkei 225 tumbling by the most on record.

Following the market ructions, Shinichi Uchida, the BOJ’s other deputy governor and a veteran policy architect, sent a clear dovish signal on Aug. 7. Given Ueda and Himino have since then diluted the dovish tilt in their messaging, Uchida was likely tasked with calming the markets in the immediate aftermath of the rout. Losses across global equity markets have mostly been erased.   

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