Will the Bank of Japan raise interest rates next Monday? A former committee member warns: If you miss the June meeting, the economy will get knocked out by inflation

Former Bank of Japan deliberation committee member Makoto Sakurai warned on May 29 that it is crucial for the central bank to raise rates in June. Although Tokyo inflation data has been disrupted by a cut in water fees, core prices could accelerate again later this year; missing the June window could leave policy lagging behind the inflation situation for the long term.
(Background recap: BOJ meeting minutes: in 2025, rates may be raised gradually to 1% if inflation matches expectations, and the yen falls below 157)
(Additional context: A former BOJ official said, “Rates must be raised next month”! Missing it could be crushed by inflation.)

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• Rate-hike window: missing June could be postponed indefinitely
• Tokyo inflation data: water-fee cuts cause disruption, but the core trend remains unchanged
• Yen trend: hidden concerns under the level of forex-market intervention
• Policy headwinds: the easing preference of Sanae Takaichi

Makoto Sakurai said on Friday (May 29) that the BOJ is very likely to raise rates at its next meeting on June 19-20, a key move for policymakers to avoid letting policy fall behind the inflation picture.

He previously served as a BOJ deliberation committee member from 2016 to 2021, and has closely observed the central bank’s policy direction.

Rate-hike window: missing June could be postponed indefinitely

Sakurai pointed out that if officials do not take action this time, they may miss the rate-hike window and, due to the ongoing high uncertainty brought by the Iran conflict, would have to postpone the next rate hike indefinitely. He emphasized:

This meeting is extremely important.

Currently, the yen exchange rate is hovering around the level at which Japanese authorities supported the yen by intervening in the forex market in May, raising the risk that rising import costs will further push up inflation.

Tokyo inflation data: water-fee cuts cause disruption, but the core trend remains unchanged

The data released on Friday showed that Japan’s BOJ-watched Tokyo inflation indicator rose 1.3% year over year in May, slower than expected and marking the smallest increase in four years. The slowdown was mainly affected by a temporary measure to cut water fees in Tokyo.

Sakurai said that Tokyo inflation data has been distorted by technical factors and will not change the BOJ’s policy path; the core inflation rate could accelerate again later this year.

Yen trend: hidden concerns under the level of forex-market intervention

The yen is currently hovering near the level seen during May’s forex-market intervention, meaning pressure from rising import costs has not been relieved. If oil prices remain high due to the Iran geopolitical conflict, imported inflation could further push up domestic prices.

After BOJ Governor Ryōichirō Sakurai raised rates in May, he had hinted that decision-makers would continue to watch whether the “wage-price” cycle is taking hold, as well as the second-round effects of exchange rates on inflation.

Policy headwinds: the easing preference of Sanae Takaichi

Sakurai mentioned that Sanae Takaichi, seen as a potential headwind to rate hikes, has long supported accommodative monetary policy. But after U.S. Treasury Secretary Bessent visits Japan this month and releases broad signals supporting rate hikes, Takaichi this time may allow the BOJ’s decision-makers to make their own judgment.