Strengthening Expectations for BOJ Rate Hikes... Two Increases Possible This Year?

Out of 51 Economists, 49 Expect a 0.25% Rate Hike This Month

With the Bank of Japan (BOJ) set to hold its monetary policy meeting on June 15-16, experts predict that the BOJ will raise its policy rate this month and hike rates once more before the end of the year.

According to a survey of 51 economists conducted by Bloomberg and released on June 10, 49 respondents expected the BOJ to increase the rate by 0.25% at this month’s meeting. Respondents also forecast that the rate would reach 1.25% by the end of the year, indicating the possibility of another hike before year-end.

Kazuo Ueda, Governor of the Bank of Japan. Photo by Reuters and Yonhap News.

If this meeting results in a rate hike, it would mark the first increase in about six months since December 2025. The policy rate would reach 1%, the highest level in 31 years since 1995.

Naomi Muguruma, chief bond strategist at Mitsubishi UFJ Morgan Stanley Securities, commented, “The focus of this meeting will be the extent to which BOJ Governor Kazuo Ueda addresses the possibility and necessity of accelerating the pace of rate hikes. In other words, the key will be whether he signals a shift to becoming an ‘inflation fighter.’”

Earlier, on June 3, Governor Ueda hinted at the possibility of a rate increase, stating, “Even amid ongoing uncertainty in the Middle East, there is a definite need to thoroughly discuss the appropriateness of raising rates.”

Despite the impact of the war in Iran, the Japanese economy has so far been described as relatively resilient. On June 8, the Cabinet Office announced that Japan’s revised gross domestic product (GDP) for the first quarter of this year grew by an annualized 1.8%, marking two consecutive quarters of expansion. BOJ officials told Bloomberg that, based on this economic resilience, they are considering raising rates next week and are also reviewing the possibility of an additional rate hike by year-end.

The Nihon Keizai Shimbun (Nikkei) also reported expectations for a rate hike at this month’s meeting. According to Nikkei, within the BOJ, there is growing support for the view that heightened tensions in the Middle East are driving up oil prices, which is leading to broader inflation and pushing up the inflation rate. Excluding the effects of government price measures, Japan’s consumer price index (CPI) rose from 2.5% in March to 2.8% in April, showing an increased rate of growth.

A BOJ official told Nikkei, “Companies are passing on prices more quickly. If we miss the timing, we may have to raise rates significantly later.” The official also noted that the downside risk to the economy from Middle East tensions is limited, and that more voices are emerging in support of raising rates in consideration of inflationary risks.

This content was produced with the assistance of AI translation services.