By Leika Kihara
URAWA, Japan, Aug 27 (Reuters) – Bank of Japan Deputy Governor Ryozo Himino said on Thursday raising interest rates in a timely manner will help avoid a spike in inflation that would require abrupt rate hikes in the future.
“If underlying inflation deviates above our 2% target, that would have an adverse impact on the economy. We should pay greater attention to upside risks to prices than in the past,” Himino said in a speech to business leaders.
“In-depth deliberations should be held at each monetary policy meeting with these perspectives in mind,” he said.
Himino said adjusting still-loose financial conditions through rate hikes would help distribute assets more efficiently to investment with growth potential.
With underlying inflation approaching 2%, the BOJ must focus on stabilising price growth around that level, he added.
A weak yen, for one, could push up inflation at a faster pace than in the past, Himino said, adding that the impact of exchange-rate moves on inflation is among key factors the BOJ will look at in guiding policy.
“As we are still pressing on the accelerator, or keeping financial conditions accommodative, I believe we will need to ease off in a timely manner through rate hikes,” he said.
“In doing so, we need to check various bits of information” including economic and price developments and financial conditions, Himino said.
(Reporting by Leika Kihara, additional reporting by Makiko Yamazaki; Editing by Christian Schmollinger and Sam Holmes)
