Bank of Japan Deputy Governor Himino warns of rising inflation risks as Japan approaches 2% target
Bank of Japan Deputy Governor Himimo Ryozo warned of upward inflation risks, saying potential inflation was close to the 2% target and stressing that delays in adjusting policy could allow inflation risks to materialize and harm the economy. Traders have almost ruled out action at the October meeting, but priced in about a 74% chance of raising interest rates again in December; the author believes that further tightening by the Bank of Japan is still on the agenda.
Editorial Comment
The hawkish statement by the deputy governor of the Bank of Japan has strengthened the market's expectations for subsequent policy normalization, but there is a significant time lag between traders' pricing of an interest rate hike in December and a hold on the policy in October. The foreign exchange market needs to pay attention to how this difference in policy expectations affects the revaluation of the yen carry trade, and the resulting indirect transmission of cross-asset fluctuations to gold.
Why we picked this
日本央行副行长警告延迟调整可能让通胀风险实现,与市场对12月加息约74%的定价形成对照。