By Leika Kihara
TOKYO, June 19 (Reuters) - Bank of Japan Deputy Governor Ryozo Himino said on Friday the central bank will continue to raise interest rates with an eye on the risk of underlying inflation overshooting its 2% target.
Wholesale inflation was accelerating at a somewhat fast pace as companies pass on rising costs from the Middle East conflict, which could lead to broader price increases, Himino said.
"There is a risk underlying inflation may deviate upward from our target," Himino told parliament
while explaining why the BOJ decided to raise its policy rate to 1% on Tuesday.
While rising oil prices from the Middle East conflict could weigh on growth, Japan's economy was showing resilience due to brisk corporate profits and household income, he said.
The U.S. said it lifted its blockade on Iran on Thursday and oil tankers sailed through the Strait of Hormuz as an interim deal to end the war took effect, though key issues are still unresolved between the two countries.
When asked about the weak yen, Himino said the BOJ was closely watching currency moves as among key factors affecting the economy and inflation.
The BOJ raised interest rates to a 31-year-high on Tuesday in a landmark step in its policy normalisation, signalling readiness to tighten further as it focuses on taming price pressures from the Iran-war-induced energy shock.
(Reporting by Leika Kihara; Editing by Himani Sarkar and Muralikumar Anantharaman)
