BOJ Signals June Rate Hike on Inflation Risks

The Bank of Japan signaled readiness for a potential interest rate hike as early as its June meeting, with several board members citing heightened inflation risks from Middle East tensions and surging oil prices, according to the summary of opinions from its April 27-28 policy meeting released on May 12.

The central bank held its short-term policy rate steady at 0.75 percent in a 6-3 vote. The three dissenting members—Hajime Takata, Naoki Tamura, and Junko Nakagawa—advocated for an immediate increase to 1.0 percent. Board members highlighted ongoing geopolitical instability, particularly between Iran and Israel, as a driver of elevated energy costs feeding into broader price pressures. The BOJ raised its inflation forecast for fiscal year 2026 to 2.8 percent, well above its 2 percent target, while lowering the growth outlook to 0.5 percent from 1.0 percent.

One board member stated, "It is quite possible the BOJ will raise interest rates from the next meeting onward, even if the future course of the Middle East conflict remains unclear." Another said the bank should "raise rates soon barring evident signs of an economic slowdown," and a third argued for accelerating hikes...