BOJ Policymaker Signals That Rate Hike Might Be Approaching

By Megumi Fujikawa

A Bank of Japan policymaker has warned that Middle East tensions could cause underlying inflation to overshoot the BOJ's target, offering another signal that rate hikes are around the corner.

"It is reasonable for the bank to raise the policy interest rate at an appropriate pace to address high inflation while also considering the trade-offs for the economy," policy board member Junko Koeda told business leaders in the southern prefecture of Fukuoka on Thursday.

Japan's underlying inflation is likely already at around 2%, Koeda said, and crude oil prices could stay elevated for some time given the developments around the conflict in the Middle East.

The comments will likely fuel already-strong expectations that the bank will hike interest rates at its next meeting in June as it grows increasingly concerned about the possibility that the rise in oil prices will accelerate underlying inflation.

A recent speech by another BOJ board member and a summary of opinions from its last meeting in April have foreshadowed a hawkish shift.

Hiking rates right as higher oil prices threaten to slow Japan's economy by restraining corporate activity and private consumption is not without risk. But BOJ Gov. Kazuo Ueda has said the bank will tighten policy settings if prices keep increasing and the economy seems likely to avoid a major downturn.

Koeda, an academic specializing in macroeconomics and finance, said the economy is likely to avoid a significant slump, as seen during the global financial crisis or the pandemic, pointing to a positive output gap, strong global tech-related demand and the government's various measures.

Write to Megumi Fujikawa at megumi.fujikawa@wsj.com

(END) Dow Jones Newswires

May 20, 2026 22:26 ET (02:26 GMT)