BOJ's Himino signals more hikes, flags growing upside inflation risk

Bank of Japan Deputy Governor Ryozo Himino delivered a hawkish message signaling that the central bank should continue raising its benchmark policy rate to keep underlying inflation stable around the 2% target. Himino warned that the BOJ board must be more attentive to upside price risks than ever before, highlighting that a persistent deviation above the target level would hurt Japan's economy. The Deputy Governor identified two main drivers currently pushing up domestic inflation: surging global demand for artificial intelligence, which has lifted export prices for memory chips and semiconductor manufacturing equipment, and persistent yen depreciation. Additionally, Himino eased dovish concerns by noting that supply disruption risks related to Middle East conflicts have diminished significantly, with Japan securing nearly 100% of its required crude oil via alternative channels by July. Himino's commentary firmly keeps expectations for further interest rate hikes alive, reinforcing the central bank's tightening trajectory. Market implications include upward pressure on Japanese government bond yields and strengthened support for the Japanese yen across major currency pairings.