BOJ will raise rates if it has more confidence in forecasts, says Vice Governor Himino.

By Leica Kihara

TOKYO (Reuters) – Bank of Japan Deputy Governor Ryozo Himino said on Thursday the central bank will consider raising interest rates if the board has “greater confidence” that its economic and price forecasts will be realized.

Himino said the BOJ’s decision on when to raise interest rates will be made by looking at the “totality” of the data presented at each policy meeting.

“We are not on a set course,” Himino said, adding that the BOJ will “carefully evaluate incoming data, the outlook evolution and the balance of risks at each meeting.”

The type of data the BOJ focuses on in setting monetary policy varies and changes over time, Himino said, noting that US employment and consumption data, as well as Chinese consumption, may now merit more attention than before.

“Later in the year, we will have more data on the pass-through of this year’s wage increase to service prices and qualitative and quantitative information related to wage negotiations in 2025,” Himino said at a seminar.

The BOJ will also have more data on how exchange rate movements could affect inflation through import prices, he said, adding that the list of data to examine is “constantly evolving”.

While statistics for the full fiscal year won’t be available until after the end of the year, the BOJ won’t necessarily wait until then to judge whether the economy is ready for further rate hikes, Himino said.

“More importantly, we monitor data to detect developments not already covered in our risk scenarios. Looking at data outside the current priority list is just as important,” he said.

The BOJ ended negative interest rates in March and raised short-term borrowing costs to 0.25% as Japan makes progress towards sustainably reaching its 2% inflation target.

Governor Kazuo Ueda has signaled the BOJ’s willingness to continue raising interest rates if the economy and prices move in line with the central bank’s forecasts.

But he also said the BOJ can afford to spend time analyzing risks, such as U.S. economic uncertainties and volatile market movements, to decide when to raise rates again.

The BOJ is widely expected to hold interest rates steady at its next meeting on October 30-31, although improving economic conditions and fears of a US recession will bring back the prospect of a rate hike in December or January.