Former BOJ Board Member: BOJ Rate Hike in June Crucial, Otherwise Will Lag Behind Inflation Situation

BlockBeats News, May 29th - Haruhiko Sakurai, who served as a Bank of Japan Policy Board member from 2016 to 2021, stated that the Bank of Japan is likely to raise interest rates next month. This meeting will determine whether the policy decision-makers can avoid falling behind the situation in addressing inflation.

Sakurai said on Friday, "It is highly likely that they will raise interest rates this time. If they do not, their policy will fall behind the situation. This meeting is extremely important." He mentioned that if officials do not take action this time, they may miss the window for raising rates and may have to indefinitely postpone the next rate hike due to the ongoing high uncertainty caused by the Iran conflict.

At the time of Sakurai's remarks, the yen exchange rate was hovering around the level set by Japanese authorities last month when they intervened in the forex market to support the yen, increasing the risk of further cost increases in imports pushing up inflation. Data released on Friday showed that the Tokyo inflation index, the focus of the Bank of Japan, rose 1.3% year-on-year in May, below expectations and marking the smallest increase in four years. This slowdown was mainly influenced by Tokyo's temporary water fee reduction measures. Sakurai pointed out that the Tokyo inflation data was disrupted by technical factors and would not alter the Bank of Japan's policy trajectory, with the core inflation rate likely to accelerate again later this year. Eriko High, seen as a potential resistance to rate hikes, has long supported loose monetary policy.

Sakurai stated that following the broad support signal for further rate hikes released by U.S. Treasury Secretary Benson during his visit earlier this month, Eriko High may allow the Bank of Japan's policy decision-makers to make their own judgment this time. (FXStreet)