Overview
- Markets are pricing roughly an 80% chance the Bank of Japan will lift its short-term policy rate to about 1% at the two-day policy meeting on June 15–16.
- Governor Kazuo Ueda’s recent speech signalled a clear move toward prioritising inflation control, raising the prospect of more rate increases later this year.
- Officials and anonymous sources say the decision will be held up to the last minute because a sharp escalation in the Iran-related Middle East conflict could force the BOJ to delay or alter its plan.
- The bank is also reviewing its plan to taper government bond purchases for fiscal 2027 and is reportedly considering pausing or slowing the taper to limit disruption in bond markets.
- Rising fuel and chemical costs have lifted wholesale prices about 4.9% year-on-year in April, which could push consumer inflation higher, squeeze households and small firms, and prompt volatile moves in global markets if yen-funded trades unwind.