A former senior official from the Bank of Japan (BOJ) has indicated the central bank may need to raise interest rates again as soon as October following an expected hike in June. This move is seen as necessary to address mounting inflationary pressures and to correct a perceived lag between monetary policy and economic conditions.
Hideo Hayakawa, a former executive director at the BOJ, shared this view in a recent interview. He stated that after a likely rate increase in June, the central bank could be compelled to implement another hike in October. The primary goal would be to counter persistent inflation and bring monetary policy more in line with the current economic reality.
Financial markets widely anticipate that the BOJ will announce a 25-basis-point interest rate increase at its upcoming monetary policy meeting next week. This would mark the first adjustment to rates since December of last year. Hayakawa pointed out that the BOJ's policy adjustments have fallen behind the curve and now require acceleration. The key focus of next week's meeting will be whether the central bank signals its intention to quicken the pace of future rate hikes.
Hayakawa emphasized that recent severe volatility in the Japanese government bond (JGB) market is a critical factor forcing the central bank to act. On May 18, the yield on Japan's 10-year government bonds briefly surged to 2.8%, reaching its highest level since 1996. He analyzed that the rapid rise in bond yields largely reflects market concerns about the BOJ's ability to execute its tightening policy. This market pressure has created a situation where the Bank of Japan may feel compelled to intervene swiftly.
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