Shida Kazuo reiterated: There is a risk of inflation exceeding the 2% target, and the Bank of Japan will raise interest rates again at the appropriate time.

The Governor of the Bank of Japan, Kaho Takeda, reiterated on Wednesday that the Bank of Japan believes there is a risk of inflation exceeding its 2% target, and will consider further raising interest rates in due course. Takeda stated in a speech read out by Deputy Governor Ryo Mitsunome, "Considering that the potential inflation rate is approaching 2% and the financial environment remains accommodative, we expect to continue raising interest rates and adjusting the degree of monetary easing based on economic activity, prices, and financial conditions." Takeda had been hospitalized for treatment of a liver cyst infection and returned to work on Tuesday. Takeda mentioned that the timing and pace of these adjustments will depend on the impact of the Iran war and other factors. This statement aligns with the message conveyed by the Bank of Japan at last week's policy meeting, which Takeda did not attend. Last week, Bank of Japan policy makers voted 7-1 to raise the benchmark interest rate to 1%, the highest level since 1995. The summary of the June 15-16 meeting released on Wednesday clearly signals that the Bank of Japan believes it is necessary to further raise the benchmark interest rate. Currently, economists expect the terminal interest rate of this rate hike cycle to reach 1.75%, higher than the 1.5% surveyed earlier this month. Data shows that Japan's core inflation rate in May remained at 1.4%, in line with expectations. Despite the government's support measures to shield households from the impact of rising prices, businesses face greater cost pressures. Japan's producer price index rose by 6.3% in May, the fastest pace in over three years, mainly due to higher energy costs. The rate hike by the Bank of Japan last week was in line with market expectations, providing limited support to the yen. Currently, the yen is hovering near its lowest level in nearly 40 years against the US dollar. Expectations of a rate hike by the Federal Reserve later this year have also put pressure on the yen. As of writing, the yen was trading at 161.70 against the US dollar, with traders remaining cautious about the possibility of intervention by the Japanese government in the foreign exchange market.