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on wednesday, bank of japan deputy governor yoshizo himino said the central bank would raise interest rates as long as japan's inflation trend met the central bank's expectations.

this suggests that the bank of japan's monetary policy stance remains largely unchanged despite sharp turmoil in japanese financial markets earlier this month over expectations of rate hikes.

is the bank of japan expected to raise interest rates in january next year?

in a speech to business leaders on wednesday, himino said the boj’s basic stance was “to study market developments and the impact of the july rate hike ... and adjust the degree of monetary easing if the boj becomes increasingly confident about the outlook for economic activity and prices.”

the bank of japan has already raised rates twice this year, and himino's comments suggest the possibility of another rate hike remains. the comments are also likely to reinforce the forecasts of many bank of japan watchers that another rate hike may be expected before january next year.

the dollar has been under pressure against the yen in recent days after federal reserve chairman jerome powell made clear at the jackson hole symposium last week that interest rates would be cut next month.

not imminent

however, comments by himino also suggested that a rate hike was not imminent for the bank of japan.

“at present, japan’s financial and capital markets remain unstable, and the bank needs to monitor their developments with the utmost vigilance,” he said. “the central bank also intends to carefully examine the impact of developments in domestic and foreign markets on the outlook for economic activity and prices.”

his comments were largely in line with what bank of japan governor kazuo ueda said at a parliamentary hearing last friday, indicating that the bank of japan is on a path to raise interest rates but is in no rush to do so at its next policy meeting in september.

after himino's speech, the yen weakened slightly and was trading around 144.3 against the dollar.

himino, a former senior official at japan's financial services agency, is the last of three top bank of japan leaders scheduled to speak publicly this month.

at the end of july this year, the bank of japan sent a hawkish signal to the outside world, which surprised the market. this move caused a global market crash. the nikkei 225 index even hit its largest single-day point drop on record at the beginning of this month.

after the market turmoil, shinichi uchida, another deputy governor of the bank of japan and a senior policy designer, sent a clear dovish signal on august 7 in an attempt to calm the market. however, as the japanese market has regained stability in recent days, kazuo ueda and ryozo himino have once again downplayed their dovish tendencies in public speeches, indicating that the bank of japan's determination to raise interest rates has not been greatly shaken by the temporary financial turmoil.