Bank of Japan members flagged potential rate increases as soon as June due to surging crude oil prices and upside inflation risks.
The Bank of Japan maintained its policy rate at the April meeting but indicated growing concerns over inflation risks tied to rising crude oil prices. Several board members suggested a rate hike could occur as early as the next meeting, citing upside risks to price stability and Japan’s vulnerable financial conditions.
Underlying CPI inflation is projected to near the 2% target between late fiscal 2026 and fiscal 2027, with risks skewed upward. Members warned of second-round inflation effects, noting Japan’s real policy rate remains the lowest globally and requires adjustment.
The BOJ described Japan’s economy as moderately recovering but forecast slower growth in fiscal 2026 due to deteriorating terms of trade. The summary of opinions underscored the need for continued monitoring of inflation dynamics and external risks.