Bank of Japan Deputy Governor Ryozo Himino on Thursday stressed the need for timely interest rate hikes, warning that inflation risks from the Middle East conflict, global artificial intelligence demand and a persistently weak yen could push underlying price growth above the central bank's 2 percent target.
Speaking at an event in Saitama, near Tokyo, Himino told an audience that "we should pay greater attention to the upside risks to prices than in the past," citing higher crude oil prices stemming from the Middle East conflict, rising semiconductor costs driven by strong global AI-related demand, and the yen's continued depreciation as key sources of upward pressure on inflation (Mainichi Japan, August 27 2026).
He added that "raising rates in a timely manner will help avoid inflation acceleration and abrupt rate hikes in the future," a move he said would ultimately serve the best interests of small and medium-sized firms as well as mortgage borrowers. The remarks signal that the BOJ leadership sees early action as preferable to delaying and being forced into steeper increases later.
The speech carries particular weight because Himino has a track record of delivering clear hints ahead of BOJ policy shifts. At a subsequent press conference, however, he stopped short of explicitly endorsing or ruling out a September hike. "We must balance the need to gain as much information as possible, and acting in a timely fashion to avoid being behind the curve on inflation," he told reporters. He added the BOJ would debate policy at each meeting, mindful that underlying inflation is approaching the 2 percent target (The Standard, August 27 2026).
The remarks reinforce the BOJ's hawkish pivot after it held rates steady at its July meeting, having already raised the benchmark rate to a 31-year high of 1.0 percent in June. Governor Kazuo Ueda had told a July post-meeting press conference that the central bank may accelerate the pace of rate hikes if financial conditions remained too loose. Prior to that, the BOJ had been expected to raise rates roughly twice a year, which would have meant the next increase not until December.
Markets have already moved well ahead of that baseline. Interest rate futures now price in an approximately 80 percent probability of a rate increase at the BOJ's September 17-18 policy meeting, with many analysts expecting a 25 basis-point move to 1.25 percent. Sources told Reuters the bank is weighing a faster pace of tightening beyond the current twice-a-year cadence, reflecting mounting concern over the breadth of price pressures (The Standard, August 14 2026, updated August 27 2026).
Several data points underpin the hawkish case. Japan's core consumer price index accelerated in July from a year earlier, and annual wholesale inflation remained elevated at a three-year high of 7.2 percent, suggesting that firms are passing higher input costs on to retail prices with a lag. At the same time, the yen hovered near 159 per dollar despite rare coordinated intervention by Japan and the United States on July 31, highlighting the challenge of containing import-cost-driven inflation without tighter monetary policy.
Himino also pushed back against the argument that further rate increases could damage a fragile economy, saying that adjusting still-loose financial conditions would help distribute assets more efficiently toward investment with growth potential. Some economists, however, caution that a September hike could be followed by another increase in December, which would mark a shift to a quarterly tightening cycle and could heighten market volatility.
Sources
- Mainichi Japan, "BOJ deputy chief calls for more rate hikes on inflation risks," August 27 2026: https://mainichi.jp/english/articles/20260827/p2g/00m/0bu/023000c
- The Standard / Reuters, "BOJ deputy chief calls for timely rate hike, focus on inflation risk," August 27 2026: https://www.thestandard.com.hk/finance/article/341093/BOJ-deputy-chief-calls-for-timely-rate-hike-focus-on-inflation-risk
