Overview
- On Tuesday June 2 Sumitomo Mitsui Financial Group’s global markets chief Arihiro Nagata publicly said the Bank of Japan should raise interest rates at its June 15-16 meeting and explicitly lay out a path toward policy normalisation.
- Japan’s 10-year government bond yield has climbed to its highest level in roughly 30 years while the yen has weakened toward 160 per dollar despite large-scale currency intervention by the Ministry of Finance.
- SMFG has proposed the BOJ halt further tapering of bond purchases and hold monthly JGB purchases near 2.1 trillion yen from April 2027 as a way to stabilise market functioning.
- Nagata also said SMFG would consider buying long-term JGBs if yields reach about 3 percent, a private-sector signal that investors may act as a backstop if price moves intensify.
- Higher energy costs from conflict in the Middle East and possible domestic fiscal moves such as a sales-tax cut raise inflation and fiscal uncertainty, which could push yields higher and force closer BOJ-MOF policy coordination.