BOJ Likely to Discuss Rate Hike at Upcoming Meeting

Tokyo, June 3 (Jiji Press)–The Bank of Japan plans to discuss raising its policy interest rate to 1 pct, likely at its upcoming policy-setting meeting, Jiji Press learned Wednesday. The Japanese central bank will hold its next two-day Policy Board meeting from June 15. The BOJ last raised the policy rate, or the target for guiding the unsecured overnight call rate, in December, to 0.75 pct. The move comes amid strong concerns that inflation could accelerate as crude oil prices remain high, though the risk of further turmoil in the Middle East has diminished. On Wednesday, BOJ Governor Kazuo Ueda gave a speech in Tokyo, saying, “It will be necessary to thoroughly discuss the pros and cons of raising the policy interest rate.” A senior BOJ official told Jiji Press that a rate hike is “possible” as long as the supply of oil-related products is unlikely to be disrupted, even if the de facto blockade of the Strait of Hormuz continues. During the speech, Ueda said that the BOJ “should be attentive to downside risks to economic activity” but “more vigilant about the risk of a significant upward deviation in inflation materializing, which could exert an adverse impact on the economy afterward.” “Interest rate hikes to date notwithstanding, Japan’s financial and economic activities have not been constrained,” the BOJ chief also said. “On the contrary, I believe accommodative financial conditions have firmly supported economic activity.” “If a delay in the necessary response later compels the bank to make a substantial policy interest rate hike, this could inflict a heavy burden not only on the economy but also on the financial markets and the financial system,” he continued. At a parliamentary meeting on the same day, Prime Minister Sanae Takaichi did not sound negative about a BOJ rate hike. “The specific method of monetary policy should be left to the BOJ, regardless of whether the government compiles a supplementary budget,” she said. Also on Wednesday, the government submitted a fiscal 2026 supplementary budget bill to deal with the impact of the Middle East turmoil. END [Copyright The Jiji Press, Ltd.]