People familiar with the matter say Bank of Japan (BOJ) officials are prepared to discuss a 25-basis-point rate hike at this month's meeting, with room for further tightening later this year. The policy rate could be raised to 1% at the meeting ending June 16.
Officials see real rates as still low and inflation risks tilted upward, justifying additional hikes. But high Middle East uncertainty means they will examine data up to the last minute. Some opposition may surface but is unlikely to block the decision.
Inflation and Geopolitical Risks
Geopolitical tensions are a key wild card. Policymakers will take a data-dependent approach, weighing incoming economic figures against global risks before finalizing any move.
Bond Tapering Plan May Be Altered
Another major agenda item is the bond purchase reduction program. Officials believe there is no need to keep the current tapering pace from next April, as bond market functioning has improved. The BOJ may consider slowing or even pausing the taper, according to the sources.
The potential change aims to prevent excessive tightening of liquidity. Discussions remain at an early stage and will factor in market conditions at the meeting.