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(Bloomberg) -- Bank of Japan Deputy Governor Ryozo Himino signaled an interest rate hike may happen next week by saying that the board will discuss it, in a comment that goes beyond recent remarks by his boss about the January meeting.
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“In conducting monetary policy, it is difficult but essential to judge the right timing,” Himino said Tuesday in a speech to local business leaders in Yokohama. “The board will have discussion to decide whether to raise the policy rate or not, based on the outlook to be compiled” at the monetary policy meeting between Jan. 23-24, he said.
The comments underscore that the BOJ isn’t ruling out raising borrowing costs this month, with most BOJ watchers seeing it coming in either January or March. When asked in the afternoon about his comments signaling the possibility of a hike, Himino refrained from elaborating much further for now.
The deputy governor also said there are various risks both for the upside and downside, and echoed Governor Kazuo Ueda by saying momentum for this year’s wage hikes and US economic policy under a new administration warrant attention.
“We think BOJ’s assessment of both 2025 wage hikes and the uncertainty over the incoming US administration has improved by one notch,” economists Takeshi Yamaguchi and Masayuki Inui at Morgan Stanley MUFG Securities wrote in a report Tuesday. “We now see higher chances of our BOJ call of a January rate hike to materialize.”
The yen weakened as much as 0.3% to 158.02 against the dollar as Himino spoke in the morning, before rebounding to around 157.50 shortly after and remaining little changed during the afternoon press conference. Overnight index swaps are pricing in about a 60% chance of a rate hike at the BOJ’s meeting next week, and an 82% chance by March.
In the last scheduled speech by a BOJ policy board member ahead of next week’s meeting, Himino indicated his expectations for wage increases to be solid this year. He cited labor shortages, a rise in minimum wages and recent surveys that, he said, showed gains broadly at or above the levels seen a year ago when labor unions and businesses agreed on the strongest pay raises in three decades.
Another key question among BOJ watchers is how long the central bank wants to monitor uncertainties in US economic policy. Himino said that that’s something the BOJ has to keep watching, although the broad picture may become clearer shortly after Donald Trump takes over the White House next week, a few days before the BOJ’s policy meeting.