Bank of Japan officials are preparing to raise the benchmark interest rate by 25 basis points at this month’s monetary policy meeting, according to people familiar with the matter. The move would lift the policy rate to 1% when the meeting concludes on June 16, marking a further step in the central bank’s ongoing policy normalisation.
Policymakers cite still-low real interest rates and persistent upside risks to inflation as grounds for further rate increases later in the year. However, they also note that high uncertainty in the Middle East means they will screen as much data and information as possible right up until the final decision. The sources said some dissenting voices are expected at the meeting, but not enough to sway the outcome.
Shifting Stance on Bond‑Purchase Tapering
Beyond the rate decision, the meeting will zero in on the BOJ’s updated plan for scaling back its bond purchases. The insiders indicate that officials see no need to maintain the current pace of reduction from April next year. With the functioning of the Japanese government bond market having improved, policymakers may consider slowing the tapering pace or even putting it on hold entirely—a sign of calibrated response to evolving market conditions.
Room for Further Tightening
The BOJ is open to additional rate hikes this year, viewing low real rates and ongoing inflation as justification for policy normalisation. The exact timing, however, will hinge on forthcoming economic data and how Middle East geopolitical risks unfold. Officials stressed they will remain nimble to ensure domestic stability.