Deputy governor Ryozo Himino said the Bank of Japan (BOJ) will raise interest rates as long as inflation moves in line with the bank’s view, underscoring the central bank’s essentially unchanged stance following ructions in the financial markets earlier in the month.

The BOJ’s basic stance “is that it will examine the impact of market developments and the July rate hike”, Himino said in a speech to local business leaders in Yamanashi, central Japan, on Wednesday. “If it has growing confidence that its outlook for economic activity and prices will be realised, it will adjust the degree of monetary accommodation.”

Himino’s comments reinforce the BOJ’s message that another rate hike remains on the table, keeping the yen under pressure a few days after the US Federal Reserve signalled there will be a rate cut next month. The deputy chief’s speech is likely to support many BOJ watchers’ forecast that another rate increase is likely by January. 

At the same time, Himino made comments that suggested a rate hike isn’t imminent. 

“Currently, the financial and capital markets remain unstable, and the bank needs to monitor their developments with the utmost vigilance,” the deputy governor said. “The bank also intends to carefully examine the impact these market developments at home and abroad have on the outlook for economic activity and prices.”

The comments are identical to what governor Kazuo Ueda said repeatedly in a parliamentary hearing last Friday, suggesting that the bank won’t be rushing to raise borrowing costs from 0.25% in its next policy meeting in September.   

The yen weakened a little after Himino’s speech, trading at around 144.3 against the dollar. 

Himino, a former top bureaucrat at the Financial Services Agency, is the last of the three top BOJ leaders scheduled to speak publicly this month. The central bank surprised markets with its hawkish signals at the end of July, in a move that contributed to a global market rout that sent the Nikkei 225 tumbling by the most on record.

Following the market turmoil, Shinichi Uchida, the BOJ’s other deputy governor and a veteran policy architect, sent a clear dovish signal on Aug 7. Given Ueda and Himino have since then diluted the dovish tilt in their messaging, Uchida was likely tasked with calming the markets in the immediate days following the rout.  

  - Bloomberg