BNY's Bob Savage notes that BoJ officials are reportedly leaning toward a 25bp rate hike to 1.0% at the June meeting, with scope for further increases in 2026 as inflation risks from energy and Japanese Yen weakness persist. Governor Ueda has signaled more tightening if inflation risks dominate, while the BoJ may slow bond purchase reductions as market functioning improves.

BoJ prepares for gradual tightening

"BoJ officials are reportedly leaning toward a 25bp rate hike to 1.0% at the June policy meeting, with policymakers also seeing room for further increases later in 2026."

"The discussion reflects concerns over persistent upside inflation risks linked to higher energy prices and yen weakness."

"Governor Kazuo Ueda recently signaled a higher likelihood of tightening if inflation risks outweigh growth concerns."

"Separately, the BoJ is expected to consider slowing the pace of bond purchase reductions from next fiscal year, as officials judge that government bond market functioning has improved and balance sheet shrinkage will continue even with a more gradual tapering approach."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)