The Bank of Japan will continue to raise interest rates while closely watching the risk that underlying inflation could exceed its 2% target, Deputy Governor Ryozo Himino said on Friday. He pointed out that wholesale inflation has been picking up as companies pass on higher costs linked to the Middle East conflict, increasing the likelihood of broader price pressures.
"There is a risk underlying inflation may deviate upward from our target," Himino told parliament, referring to the central bank's decision earlier this week to lift its policy rate to 1%.
Although higher oil prices could dampen growth, he said Japan’s economy remains resilient, supported by robust corporate profits and rising household income.
Separately, minutes from the central bank’s April meeting showed that policymakers agreed it was appropriate to continue gradually raising interest rates, given that underlying inflation is approaching 2% and real interest rates remain low, while they assess the impact of geopolitical volatility on the economy.
