Japan's underlying inflation is quite close to the Bank of Japan's 2% target and financial conditions remain loose, Deputy Governor Ryozo Himino said on Wednesday, signalling readiness to raise borrowing costs, Reuters reported from Tokyo.

While rising fuel and raw material costs are pushing up prices, brisk global AI demand is also putting upward pressure on prices by boosting exports and capital expenditure, Himino told parliament. "Given medium- and long-term inflation expectations continue to heighten, underlying inflation is quite close to 2% and will likely converge to levels consistent with our price target," Himino said.

"Even after last month's rate hike, financial conditions remain accommodative" as seen in still-low real borrowing costs and strong growth in bank lending, he said. The BOJ raised its key rate to a 31-year high of 1.25% last month, signalling its entry into a phase focused on preventing underlying inflation from overshooting its target, Reuters reported in its expanded coverage. "Given that inflation risks are high, delaying necessary adjustment to monetary support could materialise such risks and hurt the economy in the long run," Himino said, calling for the need to continue raising interest rates.

BOJ Governor Kazuo Ueda has warned that underlying inflation — the broad price trend stripping away temporary, one-off factors — may overshoot its 2% target on price pressures from the Middle East conflict, a weak yen and brisk AI demand, Reuters reported. The remarks reinforce market expectations that the BOJ will likely raise rates as soon as December, with the central bank's October 30 meeting and its fresh forecasts the next focus for traders — the same AI-driven demand that lifted Japan's exports 16.7% in September, in finance ministry data reported separately on Wednesday.

For Punjabi and Indian students, workers and families in Japan, and for diaspora traders watching the yen, another BOJ hike would mean costlier borrowing in Japan but a potentially stronger yen — a combination that moves remittances, rents and import prices well beyond Tokyo. Sources: Reuters — BOJ's Himino signals readiness to raise borrowing costs (Tokyo, Oct 21, 2026); Reuters expanded coverage via EuropeSays (Oct 21, 2026); InvestingLive analysis of Japan trade data and BOJ expectations (Oct 21, 2026).