BOJ Deputy Governor Warns of Risk from Delaying Rate Hikes

By Megumi Fujikawa

TOKYO--Raising interest rates can curb economic activity, but the Bank of Japan's deputy governor sees an even bigger danger from tightening too slowly.

Monetary policy is "not a magic bullet," but timely adjustments are vital to getting inflation on target, keeping it there, and supporting long-term economic growth, BOJ Deputy Gov. Ryozo Himino told parliament on Friday.

The comments will firm market expectations for at least one more rate hike this year after the central bank raised borrowing costs to a 31-year high of 1% earlier this week.

If the BOJ doesn't act at the right time, it could be forced to tighten more aggressively later, Himino said. A sharp rise in interest rates would weigh heavily on households and businesses through channels such as a surge in mortgages, dealing more economic damage than a steady pace of increases.

Even though inflation is currently being caused mainly by rising energy prices and a weak yen--both tied to the conflict in the Middle East--Himino said the BOJ will take action if such cost-push inflation threatens to cause overall prices to shoot higher.

Government data released Friday showed that consumer inflation remained below the BOJ's 2% target last month as food-price growth cooled. However, Himino said corporate prices are rising at a faster-than-expected pace, and the impact of surging oil costs will likely start appearing in retail prices more clearly around summer.

Consumer prices, excluding fresh food, climbed 1.4% in May from a year earlier, matching the pace marked in April, the data showed. Government subsidies have helped keep a lid on gasoline prices.

Himino also touched on the yen, the persistent weakness of which is another inflationary headache for the BOJ.

He reiterated recent remarks made by another BOJ deputy governor that foreign-exchange rates are a critical factor affecting prices, though they are not the target of monetary policy.

"Foreign-exchange fluctuations may now find it easier to affect prices than in the past," Himino said, pledging to keep a close eye on how currency swings filter through to inflation expectations to alter the underlying trend.

Markets remain on alert for potential intervention by Japanese authorities to prop up the yen, which has ground progressively past the 160 danger zone. The dollar was last trading at 161.12 yen.

Japanese officials have repeatedly issued verbal warnings this week. "We will take decisive steps against any speculative movements," Finance Minister Satsuki Katayama said Friday.

Write to Megumi Fujikawa at megumi.fujikawa@wsj.com

(END) Dow Jones Newswires

June 18, 2026 23:19 ET (03:19 GMT)