Former BOJ Board Member: BoJ’s June Rate Hike is Crucial to Avoid Falling Behind the Inflation Curve

Odaily Odaily reported that Makoto Sakurai, who served as a board member of the Bank of Japan (BoJ) from 2016 to 2021, stated that the central bank is highly likely to raise interest rates next month, and this meeting will determine whether policymakers can avoid falling behind the curve in addressing inflation.

“They are very likely to raise rates this time,” Sakurai said on Friday. “If they don’t, their policy will fall behind the curve. This meeting is extremely important.” Sakurai indicated that if officials fail to act now, they might miss the window for a rate hike and could be forced to postpone the next increase indefinitely due to the persistent high uncertainty stemming from the Iran conflict. His comments came as the yen hovered near levels that prompted Japanese authorities to intervene in the currency market last month to support it, increasing the risk of higher import costs pushing inflation further upward.

Data released on Friday showed that the Tokyo inflation gauge closely watched by the BoJ rose 1.3% year-on-year in May, a slower pace than expected and marking its smallest increase in four years. The slowdown was mainly attributed to temporary cuts in water fees by the Tokyo Metropolitan Government. Sakurai noted that the Tokyo inflation data was distorted by technical factors and would not alter the BoJ’s policy path, with core inflation likely to accelerate again later this year. Sanae Takaichi is seen as a potential obstacle to rate hikes, having long supported loose monetary policy. Sakurai suggested that after US Treasury Secretary Scott Bessent signaled broad support for further rate hikes during his visit to Japan earlier this month, Takaichi might allow the BoJ’s policymakers to make their own judgment this time. (Jin Shi)