2% target: underlying inflation nearly at goal, says BoJ’s Himino

Underlying inflation is almost at the 2% target. Bank of Japan (BoJ) Deputy Governor Ryozo Himino delivered that assessment on Wednesday, while noting that financial conditions remain accommodative.

Selected remarks

Strong AL demand driving up capex, exports. 

Underlying inflation almost at 2% target. 

Underlying inflation likely to align with Bank of Japan target. 

Medium- and long-term inflation expectations continue rising. 

Financial conditions still accommodative. 

Real interest rates stay low, bank lending expands rapidly. 

Postponing policy changes could trigger inflation risks, damage economy. 

Upside price risks elevated. 

Stable prices via suitable monetary policy would boost Japan’s sustainable growth. 

0.13% daily gain for USD/JPY

USD/JPY stands at 158.35 at the time of writing, a gain of 0.13% on the day.

2% inflation target in sight: BoJ’s Himino highlights risks, supporting Yen

An 8.2/10 FXS Speechtracker score puts BoJ’s Himino exactly at the historic average. His focus on “underlying inflation almost at 2%” and increasing medium- to long-term inflation expectations nevertheless gives the remarks a modestly hawkish slant. He presents strong AL-driven capital expenditure and exports, rapid bank lending growth and low real interest rates as grounds for concern that delaying policy changes could amplify upside price risks. The message suggests mounting unease over an extended period of ultra-accommodative policy.

A gradual normalisation bias gains further support from his warning that delayed action could “damage the economy”, alongside his emphasis on price stability through “suitable monetary policy”. In currency markets, heightened upside price risks and a firmer tone on prospective policy adjustments should underpin the Yen. That support should be particularly evident if forthcoming data confirm that underlying inflation is moving into line with the Bank of Japan’s target.