[Press Conference] Vice Governor Himino (Saitama, August 27)

The document records the Bank of Japan’s “Vice Governor Himino’s Press Conference—Thursday, August 27, 2026, from 2:00 p.m. for approximately 35 minutes,” held in Saitama City.

The opening remarks described Saitama Prefecture’s favorable features among Japan’s prefectures, including an inflow of headquarters, growth in member companies of small and medium-sized business organizations, and the social inflow of young people into municipalities. At the same time, the prices of materials, raw materials, and energy, as well as labor shortages, were identified as current challenges.

Regarding monetary policy, the Bank aims to bring the underlying inflation rate to 2% and indicated that it would consider the timing and pace appropriate to circumstances while checking the likelihood of realizing the central outlook and its risks.

The Bank of Japan is expected to gather a broad range of views from regional communities, in addition to nationwide average statistics, and communicate its policy intentions carefully.

In a world with positive interest rates, competition among financial institutions will intensify, creating greater demands for adaptation to change, risk management, and business strategy efforts. The Bank of Japan says it will coordinate closely with the Financial Services Agency to provide appropriate support.

Expectations were expressed that efforts under way in Saitama Prefecture to pass through prices and address labor shortages will bear fruit, allowing the prefectural economy to develop further.

Saitama Prefecture’s transportation network was described as serving six of the seven Shinkansen routes. It was also explained that only six cities in the world can reach 50 million people within one hour, and that Saitama City is one of them. Other initiatives introduced included social population growth through startup support, the “Saitama Model” for price pass-through, a prefectural negotiation app, a matching system addressing labor shortages, and an effort enabling students to ask AI about their aptitude and identify internship placements. Statistics from the Bank of Japan are used as one of the app’s core data sources.

In deciding on an additional rate hike, the Bank will check the likelihood of realizing the central economic and price outlook and its risks, including the effects of the situation in the Middle East, expanding AI-related demand, and foreign exchange rate movements. It did not indicate what it would do at the specific September meeting, stating that the matter would be considered at every meeting, including the next one.

The three risks to watch going forward are the situation in the Middle East, AI-related developments, and foreign exchange rate movements. For the Middle East, the Bank will monitor crude oil prices and supply availability; for AI-related developments, whether the economic effects are localized or extend across Japan, as well as the direction of the global AI boom; and for foreign exchange, the effects on the economy and prices. Statistics since July have generally followed the outlook, while weakness in domestic demand, business investment, and private consumption in GDP was attributed mainly to technical factors, such as intellectual property transactions and the shift to government consumption resulting from free school lunches.

It was explained that the rise in long-term interest rates may have been affected by inflationary pressure stemming from the situation in the Middle East, large corporate bond issuance by AI-related companies, and market views of fiscal policies in various countries. No particular problems were observed in the functioning of the government bond and long-term interest rate markets, and the Bank of Japan said it would proceed with its balance sheet in line with the policy it had already announced.

At the June meeting, amid differing views among the members, a majority supported the Chair’s proposal that a rate hike in June was appropriate. The bankruptcy of Zentoshin was regarded as an individual case rather than a sign of risk to the financial system as a whole. The Vice Governor stated that decisions would be based on the best forecast available at each meeting, without waiting until complete information on the effects on the financial system became available, and would comprehensively consider upside risks to prices and the risk that policy could fall behind the curve.