BoJ’s Himino says underlying inflation almost at 2% target

Bank of Japan (BoJ) Deputy Governor Ryozo Himino said on Wednesday that underlying inflation is almost at the 2% target, adding that financial conditions still accommodative.

Key quotes

Strong AI 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. 

Market reaction

At the time of writing, the USD/JPY pair is up 0.13% on the day at 158.35.

BoJ’s Himino flags rising inflation risks, keeping Yen underpinned

BoJ’s Himino scores 8.2/10 on FXS Speechtracker, exactly in line with the historic average, but the emphasis on “underlying inflation almost at 2%” and rising medium- to long-term expectations marks a modest hawkish tilt. Strong AL-driven capex and exports, rapidly expanding bank lending, and low real rates are framed as reasons why postponing policy changes could heighten upside price risks, signaling growing discomfort with prolonged ultra-accommodation.

The warning that delaying action could “damage the economy” and the stress on achieving stable prices via “suitable monetary policy” reinforce the case for a gradual normalization bias. For FX, the combination of elevated upside price risks and a more assertive tone on future policy adjustments should help keep the Yen supported, especially if incoming data confirm that underlying inflation is aligning with the Bank of Japan’s target.