For the first time since the current policy decision-making framework was established in 1998, the Governor of the Bank of Japan will be absent from a scheduled policy meeting. The central bank announced on June 10 that 74-year-old Governor Kazuo Ueda was urgently hospitalized due to a liver cyst infection and is expected to be hospitalized for about two weeks, making him unable to attend the monetary policy meeting on June 15-16.
Governor Ueda will not participate in next week's vote but will submit his policy stance in writing. The Bank of Japan stated that he is expected to attend the next policy meeting scheduled for July 30-31.
The central bank also announced that Deputy Governor Ryozo Himino will chair the upcoming policy meeting in Ueda's place, while Deputy Governor Shinichi Uchida will chair the post-meeting press conference. Notably, Uchida himself had only recently been discharged from the hospital after recovering from leukemia treatment, making the consecutive health issues among the BOJ's top leadership a relatively rare occurrence.
Concurrently, Japanese Prime Minister Sanae Takachi has long advocated for loose monetary policy. Analysts point out that if Governor Ueda's health condition continues to deteriorate, it could provide her with an opportunity to influence the direction of the Bank of Japan's policy.
Market Bets Firmly on Rate Hike
Despite the Governor's absence, the market's judgment for this meeting remains unwavering: an interest rate hike is expected.
According to reports, overnight swap markets have priced in an 88% probability of a Bank of Japan rate hike on June 16. This expectation is underpinned by three main factors.
First, inflationary pressures persist. Conflicts in the Middle East have pushed up energy and commodity prices. Japanese inflation has exceeded the central bank's 2% target, while real interest rates remain low.
Second, the yen continues to face pressure. The yen has recently hovered around the 160 level against the US dollar, a level that has previously triggered multiple interventions by Japanese authorities. Data indicates that Japan has utilized approximately $74 billion to intervene in the currency market since late April.
Third, Governor Ueda himself sent a clear signal in his last public remarks before hospitalization. He stated that if the risk of prices rising more than expected outweighs the negative economic impact of geopolitical conflicts, "the central bank will need to consider raising interest rates." The directness of this wording was interpreted by the market as a strong policy preview.
During the previous meeting in April, three out of nine board members had already voted to raise the short-term policy rate from 0.75% to 1%. Since then, board members Junko Koeda and Kazuyuki Masu have also publicly expressed support for a rate hike in the near term, meaning that if a hike is pursued, Governor Ueda likely already has majority support within the board.
Communication Challenge Emerges from Governor's Absence
While the rate hike itself may proceed unaffected, Governor Ueda's absence makes another matter more complicated: how the Bank of Japan communicates its future interest rate path to the market.
An executive interest rate strategist at Nomura Securities, Mari Iwashita, directly highlighted the issue: "Due to Ueda's absence, the BOJ may decide not to send a clear signal about the future interest rate path. Given the uncertainty about when the governor can fully recover, whether there will be another rate hike this year has also become more unclear."
This is not a minor issue. Central bank policy communication is essentially about managing market expectations. The governor is the core of this communication mechanism—his wording, tone, and even a single phrase during a press conference are repeatedly parsed by the market. With the governor absent and a deputy chairing the meeting, whether the market can read equally weighted policy signals from this remains an open question.
The Bank of Japan is currently at a critical turning point: shifting from decades of ultra-loose policy to a genuine anti-inflation tightening cycle. This transition requires clear and consistent policy communication to stabilize expectations, and Governor Ueda's absence precisely creates uncertainty at this juncture.
A Potential Opening for Prime Minister Takachi
Governor Ueda's health condition also brings another potential development to light.
Japanese Prime Minister Sanae Takachi has long been a staunch supporter of loose fiscal and monetary policies and has previously publicly expressed reservations about the Bank of Japan's rate hike plans on multiple occasions. Analysts cited by media suggest that Governor Ueda's health issues could provide Takachi with an opportunity to influence the direction of the Bank of Japan's policy—especially regarding the leadership appointment. If Governor Ueda ultimately chooses to resign, his successor would be nominated by the prime minister.
A senior economist at Oxford Economics in Tokyo, Norihiro Yamaguchi, expressed a more cautious view on this scenario, suggesting that a resignation by Ueda "currently seems unlikely." However, he acknowledged: "That said, if Takachi needs to appoint a new governor, she is indeed more likely to choose a candidate with a more dovish stance."
Currently, Governor Ueda is expected to receive about two weeks of treatment in the hospital, handle work remotely, and plans to attend the next policy meeting on July 30-31. In other words, his "absence" is currently temporary, and the political variables have not yet truly materialized.
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