Speculation Grows on Japan's May Rate Hike... Former BOJ Official Says "June Hike Likely"

Interview with Former BOJ Policy Board Member Kazuo Moma
"June or After September"... Rules Out May and July

The main building of the Bank of Japan (BOJ) located in Tokyo, Japan. Kazuo Moma, former BOJ Monetary Policy Director, raised the possibility of a rate hike in June during an interview with Bloomberg News on the 11th. / AP News · Yonhap News

Amid market speculation about an early rate hike in Japan in May, Kazuo Moma, former BOJ (Bank of Japan) Monetary Policy Board member, raised the possibility of a June rate hike in an interview with Bloomberg News in the U.S. on the 11th (local time).

Moma, former BOJ Monetary Policy Board member, said, "In the most basic scenario I consider, June is the most likely option," adding, "However, depending on the economic and financial market conditions, it could be postponed until after September."

Recently, market expectations have been spreading that the BOJ will raise rates in May due to favorable Japanese economic indicators. U.S. Reuters reported that recent wage increases and continuous rises in food prices are increasing inflationary pressures, raising the possibility of an additional rate hike in May. It is speculated that the BOJ Policy Board meeting held over two days from April 30 to May 1 could discuss an additional rate hike.

Bloomberg News surveys also confirmed that the May rate hike theory is gaining traction. Recent survey results showed that market participants estimated a 28% probability of a rate hike at the BOJ policy meeting on May 1. This is more than double the probability right after the January rate hike. In a survey conducted by Bloomberg News shortly after the rate hike earlier this year, July was considered the most likely time for the next rate increase.

Moma opposed such forecasts, saying, "The possibility of an early rate hike is low." He cited two prerequisites for an early rate hike: ▲ a clear risk requiring policy response due to a sharp decline in the yen's value, or ▲ confirmation of much stronger-than-expected wage increases in the annual wage negotiations.

He added, "BOJ's Policy Board has become more cautious as U.S. President Donald Trump's tariff policies have raised concerns about the U.S. economic outlook, and it will not give clear signals about the timing of the next rate hike for the time being."

He also ruled out the possibility of a rate hike in July due to the scheduled House of Councillors (upper house) election. Moma said, "Since Prime Minister Shigeru Ishiba is expected to hold a general election in July, raising rates at that time would cause political uncertainty," explaining, "It is a time when the central bank cannot ensure sufficient communication with the government." He added, "If the rate hike does not occur in June, it is more likely to be postponed until after September, but it will not be implemented in July."

He emphasized, "It is important to maintain market expectations that the BOJ will adjust rates at six-month intervals," noting, "This can prevent the risk of a sharp rise in bond yields and avoid criticism that policy responses are delayed."

The BOJ raised its policy rate from 0.25% to 0.5% in January this year, marking the first rate hike since 2008. BOJ Deputy Governor Shinichi Uchida has stated that if the actual economic situation aligns with the outlook, the rate hike trend will continue.