By Leika Kihara
KUSHIRO, Japan (Reuters) -Bank of Japan Deputy Governor Ryozo Himino said on Tuesday the central bank should keep raising interest rates but warned that global economic uncertainty remains high, suggesting it was in no rush to push up still-low borrowing costs.
While Japan's trade deal with the U.S. helps alleviate uncertainty over the economy, the exact impact of U.S. tariffs remained unknown at this time, he said.
"At the moment, the risk of a larger-than-expected impact may deserve
greater attention," Himino said in a speech to business leaders in Kushiro, northern Japan. "Overall, the global economy still faces high levels of uncertainty."
Himino also said there were both upside and downside risks to the inflation outlook. While Japan's tight labour market may push up wages, slowing global growth and the hit to Japan's economy from higher U.S. levies could weigh on prices, he said.
"After temporarily stalling due to slowing growth from the impact of tariffs, we expect Japan's underlying inflation to eventually stabilise around levels consistent with our 2% target," Himino said.
"If our baseline scenario is realised, it would be appropriate to continue raising interest rates in accordance with improvements in the economy and prices," he said.
Himino offered few hints on how soon the central bank could raise interest rates, saying only that he wanted to scrutinise "without preconception" whether the BOJ's baseline forecasts would materialise.
"We must continually assess the balance of risks, both upside and downside, and respond in a timely and appropriate manner to ensure that, even if conditions deviate from the baseline scenario, the damage is well contained," he said.
(Reporting by Leika Kihara; Editing by Shri Navaratnam and Sam Holmes)
