BNY reports that BoJ Deputy Governor Ryozo Himino signaled continued consideration of further rate hikes, with timing dependent on how Middle East conflict impacts Japan’s economy and inflation. He emphasized the need to adjust easing at an appropriate pace as JGB yields hit 1996 highs, reinforcing a more hawkish tone and lifting market odds of a June BoJ move.

Higher JGB yields and hawkish BoJ tone

"BoJ Deputy Governor Ryozo Himino has said the central bank would continue considering further interest rate increases, but stressed that the timing and pace of tightening would depend heavily on how the Middle East conflict affects Japan’s economy and inflation outlook."

"Speaking in parliament, Himino warned that the BoJ’s baseline forecasts could shift sharply due to higher energy prices and global inflation risks stemming from the conflict."

"He emphasized that the BoJ must adjust monetary easing at an appropriate pace to maintain market confidence in its commitment to controlling inflation, particularly as Japanese government bond yields have climbed to their highest levels since 1996."

"His remarks reinforced increasingly hawkish communication from BoJ officials, with markets now assigning a high probability to a June rate hike as policymakers grow more concerned about persistent inflationary pressures and the risk of inflation overshooting forecasts."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)