Former Bank of Japan Board Member: June rate hike crucial for BOJ to avoid lagging behind inflation

Odaily Planet Daily News: Makoto Sakurai, who served as a board member of the Bank of Japan from 2016 to 2021, stated that the BOJ is highly likely to raise interest rates next month, and this meeting will determine whether policymakers can avoid falling behind the curve in tackling inflation.

Sakurai said on Friday: "They are very likely to raise rates this time. If they don't, their policy will fall behind the curve. This meeting is extremely important." He added that if officials fail to act this time, 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. Sakurai's comments came as the yen hovered near levels that prompted Japanese authorities to intervene in the currency market last month to support it, raising the risk that higher import costs will further stoke inflation.

Data released on Friday showed that the Tokyo inflation gauge, closely watched by the BOJ, rose 1.3% year-on-year in May, slower than expected and marking its smallest increase in four years. This slowdown was mainly attributed to temporary cuts in water charges by the Tokyo metropolitan government. Sakurai pointed out that the Tokyo inflation data was distorted by technical factors and would not change the BOJ's policy path. Core inflation is likely to accelerate again later this year. Sanae Takaichi, a long-time supporter of easy monetary policy, is seen as a potential obstacle to rate hikes. Sakurai noted that after US Treasury Secretary Bessent signaled broad support for further rate increases during his visit to Japan earlier this month, Takaichi might allow the BOJ policymakers to make their own decisions this time. (Jin Shi)