By Leika Kihara
TOKYO, Oct 21 (Reuters) – Japan’s underlying inflation is quite close to the central bank’s 2% target and financial conditions remain loose, Deputy Bank of Japan Governor Ryozo Himino said on Wednesday, signalling readiness to raise borrowing costs.
While rising fuel and raw material costs are pushing up prices, brisk global AI demand is also putting upward pressure on prices by boosting exports and capital expenditure, Himino told parliament.
“Given medium- and long-term inflation expectations continue to heighten, underlying inflation is quite close to 2% and will likely converge to levels consistent with our price target,” Himino said.
“Even after last month’s rate hike, financial conditions remain accommodative” as seen in still-low real borrowing costs and strong growth in bank lending, he said.
“Given that inflation risks are high, delaying necessary adjustment to monetary support could materialise such risks and hurt the economy in the long run,” Himino said, calling for the need to continue raising interest rates.
(Reporting by Leika Kihara; Editing by Christian Schmollinger)
