The Bank of Japan is leaning toward a 0.25 percentage point rate increase at its monetary policy meeting on June 15-16, the Nihon Keizai Shimbun reported.
According to the Nikkei on Monday, the Bank of Japan plans to raise its policy rate to 1.0% from the current 0.75% to guard against inflation risks. If the increase is approved, it would mark Japan's first rate hike in six months since December last year, with a policy rate of 1.0% representing the highest level in 31 years since 1995.
Within the Bank of Japan, there is a strong view that rising oil prices stemming from the war with Iran will push up price trends. Bank of Japan Governor Kazuo Ueda hinted at the possibility of a hike on Tuesday, saying, "Even with the uncertain situation in the Middle East, we need to firmly discuss the appropriateness of a rate increase." The Bank of Japan's own estimate of the consumer price index (CPI) growth rate, which excludes the effects of price-suppression measures such as government subsidies for electricity and gas charges, accelerated from 2.5% in March to 2.8% in April.
The tapering measure, or reduction in government bond purchases, is also likely to be halted after April 2027. According to the Nikkei, the Bank of Japan is considering a plan to continue reducing purchases by 200 billion yen each quarter only through the first quarter of 2027, while maintaining 2.1 trillion yen in monthly bond purchases. With unstable movements continuing in the bond market recently due to concerns over inflation and fiscal expansion, the intention is to seek market stability by halting tapering. However, the Nikkei reported that some within the bank are also calling for tapering to continue.
