BOJ May Hike Rates Twice by March as 1% Move Signals Inflation Alarm
Updated
Updated · Reuters · Jun 19
BOJ May Hike Rates Twice by March as 1% Move Signals Inflation Alarm
1 articles · Updated · Reuters · Jun 19
Summary
Two more BOJ rate hikes could come by March, former board member Makoto Sakurai said, with the next move likely in October or December after this week's increase.
Tuesday's decision lifted the short-term policy rate to 1%—a 31-year high—and, Sakurai said, marked a shift from nurturing 2% inflation to actively preventing overshoot.
Wholesale-price gains are expected to feed into consumer inflation over July-September; if price growth accelerates sharply, the BOJ could tighten in October and again before fiscal year-end.
Sakurai said strong corporate profits and a tight labor market keep inflation risks above recession risks, though policymakers may move cautiously to avoid puncturing an asset-price bubble.
He sees rates reaching about 2% by early 2028, while warning that Prime Minister Sanae Takaichi's debt-funded 3 trillion yen extra budget could weaken the yen and undercut the BOJ's anti-inflation push.
As Japan's government fuels inflation and its central bank fights it, which policy will break first?
Can Japan reverse the yen's historic slide without triggering a domestic economic downturn?
Is Japan's high-spending, weak-yen strategy a bug or a deliberate feature to escape its long stagnation?
BOJ Raises Rates to 1% in 2026: Breaking Decades of Easy Money as Inflation Surges
Overview
On June 16, 2026, the Bank of Japan made a historic policy shift by raising its short-term policy rate to 1% for the first time since 1995. This move marked a clear break from decades of ultra-loose monetary policy and signaled a new focus on tackling inflationary pressures in Japan. Alongside the rate hike, the BOJ announced a significant reduction in government bond purchases, planning to decrease them by 200 billion yen each quarter until April 2027. Together, these actions highlight the BOJ’s commitment to normalizing policy and addressing rising inflation in the Japanese economy.