Bank of Japan will continue raising interest rates while closely monitoring the risk that underlying inflation could exceed its 2% target, Deputy Governor Ryozo Himino said on Friday. He noted that wholesale inflation has been accelerating as firms pass on higher costs stemming from the Middle East conflict, raising the possibility of broader price pressures. “There is a risk underlying inflation may deviate upward from our target,” Himino told parliament, explaining the central bank’s decision to lift its policy rate to 1% earlier this week. While higher oil prices could weigh on growth, he added that Japan’s economy remains resilient, supported by strong corporate profits and rising household income. Meanwhile, minutes from the central bank’s April meeting showed policymakers agreed that, with underlying inflation nearing 2% and real interest rates still low, it was appropriate to continue gradually lifting rates while assessing the impact of geopolitical volatility on the economy.

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