Former BOJ Board Member: June Rate Hike Crucial for BOJ to Avoid Falling Behind the Inflation Curve

According to Odaily, Makoto Sakurai, a former Bank of Japan (BOJ) board member from 2016 to 2021, stated that the BOJ is highly likely to raise interest rates next month, and this meeting will be crucial for policymakers to avoid falling behind the curve in tackling inflation.

"They are very likely to hike this time. If they don't, their policy would fall behind the curve. This meeting is extremely important," Sakurai said on Friday. He added that if officials fail to act now, they risk missing the window for a rate hike and may be forced to postpone the next increase indefinitely due to persistently high uncertainty stemming from the Iran conflict. Sakurai's comments come as the yen hovers around levels that prompted Japanese authorities to intervene in the market last month to support the currency, raising the risk that higher import costs will further fuel inflation.

Data released on Friday showed that Tokyo's inflation gauge, closely watched by the BOJ, rose 1.3% in May year-on-year, a slower pace than expected and the smallest gain in four years. The slowdown was mainly attributed to the temporary reduction of water charges 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. Core inflation is likely to accelerate again later this year. Finance Minister Shunichi Suzuki is seen as a potential obstacle to further rate hikes, having long supported accommodative monetary policy. Sakurai suggested that Suzuki may allow the BOJ's policymakers to make their own judgment this time, following widespread signals of support for further rate hikes released during US Treasury Secretary Scott Bessent's visit to Japan earlier this month. (Jin Shi)