Bank of Japan Signals Continued Interest Rate Hikes

Bank of Japan Deputy Governor Ryozo Himino stated Monday that the central bank is expected to gradually shift to a more neutral monetary policy. This transition will involve continuing to raise interest rates.

Himino noted that the impact of past rate increases on Japan's economy has so far been limited. While underlying inflation is rising steadily, he cautioned that it remains premature to definitively confirm it has reached the 2 percent target.

He further explained that the inflation gap, the difference between current underlying inflation and the BOJ's 2 percent target, is currently slightly negative but is projected to approach zero. This outlook suggests that while the Bank's policy remains somewhat accommodative, a move towards a more neutral stance through moderate policy rate hikes is likely.