Japan’s central bank is widely expected to increase its key interest rate to 1% at its June meeting – a level not reached in nearly three decades. However, with the bank’s governor currently hospitalized, the focus is shifting to what the bank will do after this expected rate hike.
A recent Reuters survey of 70 economists shows that nearly all of them (94%) anticipate an interest rate change by the end of the month. This expectation is driven by several factors: wholesale prices increased by 4.9% compared to last year, the Japanese yen has significantly weakened to over 160 yen per dollar, and the Japanese government has spent approximately $73 billion trying to stabilize the yen’s value since late April.
A BOJ Rate Hike Without Its Architect
Kazuo Ueda, the 74-year-old governor of the Bank of Japan, was hospitalized on June 10th with a liver infection. This is the first time since 1998 that a BOJ governor has been unable to attend a policy meeting. Ryozo Himino, a deputy governor, will lead the meeting in Ueda’s absence. Shinichi Uchida, another deputy governor who recently received a leukemia diagnosis, will handle the press conference following the meeting.
Everyone expects the Bank of Japan to raise interest rates, but people are still worried about what the BOJ will do after that. Historically, the markets have often reacted just as strongly to the BOJ’s statements *after* a meeting as they do to the rate change itself.
According to Mari Iwashita, a rates strategist at Nomura Securities, the Bank of Japan might not give a clear indication of where interest rates are headed, as she told Reuters.
There’s growing uncertainty about whether the Bank of Japan (BOJ) will raise interest rates again this year. Shigeto Nagai, from Oxford Economics, believes the recent rate increase was primarily to stop the Japanese yen from losing even more value.
Beyond 1%: Who Drives the Next Phase
According to a recent Reuters survey, most economists—over 75%—believe interest rates will rise to 1.25% by the end of 2026. Furthermore, two-thirds anticipate rates reaching 1.5% by the middle of 2027.
As an analyst, I’m watching the political landscape closely, as it could impact the Bank of Japan’s future direction. Currently, Prime Minister Sanae Takaichi, who favors more relaxed monetary and fiscal policies, will soon have the opportunity to appoint new members to the BOJ. Two of the current board members, known for their preference for tighter policy, will see their terms end in July 2027, giving the Prime Minister significant influence over the BOJ’s composition and potentially its policies.
Changes to the Bank of Japan’s staff next year could significantly alter the decision-making dynamics within the board, according to Tsuyoshi Ueno, a senior economist at NLI Research Institute. This might make it hard for the BOJ to take any actions that would upset the government.
The hike in June is all but certain. What happens after that – whether interest rates will continue to rise – will depend on how the economy performs, how quickly the governor recovers from any health issues, and how long the prime minister is willing to wait for results.
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2026-06-12 07:41