Odaily, citing Jinshi, reported that Seisaku Kameda, a former chief economist at the Bank of Japan, said on Monday that the peace agreement between the United States and Iran is not expected to change the outlook for the BOJ to raise interest rates twice this year. His comments focused on the central bank’s June meeting and the expected path of monetary policy, with the main point being that the peace agreement may ease some inflation-related pressure but does not alter the BOJ’s broader plan to normalize policy.
Short-term policy rate expected to rise from 0.75% to 1%
As inflationary pressure intensifies, the Bank of Japan is expected on Tuesday to raise its short-term policy rate from 0.75% to 1%. Kameda said that, if the Middle East war had not broken out, the move should originally have taken place in April. In his view, the Middle East situation affected the timing of the BOJ’s action, but it did not change the direction of rate hikes.
Kameda also said that if the peace agreement leads to the smooth reopening of the Strait of Hormuz, it would reduce some pressure on the BOJ to raise rates faster than expected in order to contain inflation. However, he stressed that this would not change the BOJ’s plan to raise rates at a pace of about twice a year, lift real borrowing costs that remain low, and normalize monetary policy.
Next hike after June points to October or December
On the specific policy timetable, Kameda said that after a June rate hike, the Bank of Japan is highly likely to raise rates again in October or December. That view is consistent with his expectation of two rate increases this year and with the pace he described as roughly two hikes per year.
The report also noted that BOJ Governor Kazuo Ueda will miss the June meeting because he is receiving hospital treatment for an infectious liver cyst. Deputy Governor Shinichi Uchida will chair the press conference in his place. Kameda said Uchida is expected to reiterate the BOJ’s determination to keep raising rates, but given the remaining uncertainty around the Middle East situation, he will avoid offering a clear indication of the timing of the next rate hike.