BOJ Weighs Middle East War in June Rate Decision as Markets Price 80% Hike Odds

2 articles · Updated · Reuters · May 26

Ryozo Himino said the BOJ will judge the timing and pace of further rate hikes by tracking how the Middle East conflict changes Japan's economy and inflation outlook.
Surging fuel costs could both lift prices and squeeze Japan's oil-dependent economy, potentially shifting the BOJ's baseline scenario even as real borrowing costs remain very low.
Markets are pricing about an 80% chance of a rate increase at the June 15-16 meeting after recent hawkish BOJ remarks, though Himino said tightening must proceed at an appropriate pace to preserve confidence on inflation control.
The backdrop has grown more complicated since the BOJ ended its massive stimulus in 2024: the 10-year JGB yield hit 2.8% last week, and three of nine board members had already proposed a hike at April's meeting.

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