Former Bank of Japan Economist: US-Iran Peace Agreement Won’t Change BOJ’s Rate Hike Plans

Odaily News  Seisaku Kameda, former chief economist of the Bank of Japan, stated on Monday that a peace agreement between the US and Iran is unlikely to alter expectations of two interest rate hikes by the BOJ this year. Amid mounting inflationary pressures, the BOJ is expected to raise its short-term policy rate from 0.75% to 1% on Tuesday. Kameda noted that had it not been for the outbreak of the Middle East war, the hike would have likely occurred in April. He added that if a peace deal facilitates the smooth reopening of the Strait of Hormuz, it could ease some pressure on the BOJ to accelerate its pace of rate hikes beyond current expectations to curb inflation.

“However, this will not change the BOJ’s plan to raise rates at a pace of roughly two times per year, pushing up still-low real borrowing costs and normalizing monetary policy,” Kameda said. He pointed out that following a rate hike in June, the BOJ is likely to raise rates again in October or December.

Additionally, BOJ Governor Kazuo Ueda will miss the June meeting due to treatment for an infectious liver cyst in the hospital. Deputy Governor Shinichi Uchida will host the press conference in his place. Kameda indicated that Uchida is expected to reaffirm the BOJ’s determination to continue raising rates but will avoid giving clear hints on the timing of the next hike, given the lingering uncertainties in the Middle East situation. (Jin Shi)