Former Bank of Japan Board Member: BOJ’s June Rate Hike Crucial to Avoid Falling Behind Inflation

Odaily Odaily Planet Daily News Makoto Sakurai, who served as a Bank of Japan board member from 2016 to 2021, said the central bank is likely to raise interest rates next month, and this meeting will determine whether policymakers can avoid falling behind the curve in dealing with inflation.

“They are highly 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 said if officials fail to act now, they could miss the window for a rate hike and be forced to postpone the next increase indefinitely due to persistent high uncertainty stemming from the Iran conflict. Sakurai’s comments come as the yen hovers near levels that prompted Japanese authorities to intervene in the currency market last month to support it, increasing the risk that higher import costs will further fuel inflation.

Data released on Friday showed the Bank of Japan’s closely watched Tokyo inflation indicator rose 1.3% in May from a year earlier, a slower pace than expected and the smallest increase in four years. The slowdown was mainly attributed to temporary cuts in 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, with core inflation likely to accelerate again later this year. Sanae Takaichi, seen as a potential obstacle to rate hikes, has long supported loose monetary policy. Sakurai said that following U.S. Treasury Secretary Bessent’s visit to Japan earlier this month, which signaled broad support for further rate hikes, Takaichi may now allow BOJ policymakers to make their own judgments. (Jinshi)