Bank of Japan Gov. Kazuo Ueda promised not to push for interest-rate increases, denying speculation that the bank is trying to secure a buffer in case of an economic shock. However, Ueda reiterated the BoJ’s readiness to adjust its ultra-loose policy if the economy grows in line with its projections.
The Governor told a parliamentary committee on June 3 that the central bank had no intention of forcefully raising the policy rate only to make room for future rate cuts when improvement in economic and price conditions was not anticipated.
Ko Nakayama, Chief Economist at Okasan Securities and a former BOJ official, previously said market views over the potential for a BOJ rate hike swung a lot.
Still, the BOJ’s stance has not changed, adding that September will be the earliest timing for the next rise. He, however, clarified that the BOJ does not want to sound like it is “divorced from reality” by only focusing on an “academia perspective” when so much is happening, including tariffs.
Ueda says U.S. tariffs could weigh on Japanese corporate sentiment
Governor Ueda said in parliament today that recently imposed U.S. tariffs could weigh on Japanese corporate sentiment, potentially impacting winter bonus payments and next year’s wage negotiations. He acknowledged that wage growth may “slow somewhat” in the near term due to these external pressures and cautioned that uncertainty surrounding the economic outlook remained “extremely high.”
However, the BOJ Governor expressed confidence that wage momentum would eventually “re-accelerate,” helping sustain moderate household consumption growth. The BOJ is expected to hold its settings steady at its next policy meeting on June 17 but may consider another rate hike this year if economic data continues to improve.
“If we’re convinced our forecast will materialize, we will adjust the degree of monetary support by raising interest rates.”
–Kazuo Ueda, Governor at the Bank of Japan
The BOJ ended a massive stimulus last year and raised short-term interest rates to 0.5% in January on the view that Japan was on the cusp of durably hitting its 2% inflation target. Ueda said the BOJ kept interest rates low even as headline inflation hit 4.6% in April, well above its 2% target, as it expected the rise in food prices to slow.
Economists expect the BOJ to hold rates steady through September
A Reuters poll taken on May 7-13 showed that most economists expected the BOJ to hold rates steady through September, with a small majority forecasting a hike by year-end. The central bank will review its existing bond-taper plan at its next meeting on June 16-17 and outline a new program for April 2026 onward.
However, the plan drew market attention as concern over Japan’s worsening finances and declining demand from domestic investors caused a spike in super-long government bond yields last month. The BOJ held meetings with bond market participants on May 20-21 to seek their views on the desirable taper plan, which will be considered at the June rate review.
Ueda said calls at the meeting for the BOJ to make amendments to the existing plan were limited, suggesting the review may not lead to major tweaks to the existing taper program. He added that many opinions also called on the need for the BOJ to continue tapering in line with its plan beyond April 2026 while balancing the need to do so “flexibly and predictably.”
Minutes of the meeting released on Monday showed the BOJ received a notable number of requests to maintain or slightly slow the pace of tapering from fiscal year 2026 onward. They also showed that although participants differed on how much the central bank should taper beyond April 2026, several called for reducing its monthly purchases to around $7 billion–$14 billion by the end of the new taper program.
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This articles is written by : Nermeen Nabil Khear Abdelmalak
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