- BoJ seen lifting rates 25bps to 1.00% on Tuesday
- Officials warn energy costs are feeding through faster
- Markets price almost two more hikes by year-end
- Yen intervention seen as no substitute for tighter policy
- Rate announcement due around 03:00 GMT onwards
- Press conference set for approximately 05:30 GMT

By Harry Daniels
LiveSquawk News
@HarryDaniels71

16:00 GMT | 15 Jun 2026

Growing concern that underlying inflation expectations could become unanchored is said to be driving the Bank of Japan’s case for higher interest rates.

At the conclusion of its closely watched monetary policy meeting, the BoJ is widely expected to raise rates by 25 basis points to 1.00% on Tuesday afternoon local time.

In a break from convention, Deputy Governor Ryozo Himino will chair the policy meeting, while Shinichi Uchida is set to deliver the post-meeting press conference in the absence of hospitalised Governor Kazuo Ueda.

Despite some positive developments in the Middle East, BoJ officials have expressed concern that the pace at which companies are passing higher costs on to consumers has accelerated to a point where policymakers may need to act. “If we miss the timing, we may be forced to raise rates significantly later.”

Bank of America economist Izumi Devalier said that with a June hike already fully priced in, market focus will shift to guidance on the future policy path. “The BoJ will need to sound sufficiently hawkish to keep expectations of further tightening alive and prevent further yen weakness,” the analyst said.

Since the last meeting in late April, policymakers have become notably more explicit about the inflationary spillovers from higher energy prices.

Governor Ueda, speaking at a conference in May, said the persistence of inflation would depend on whether higher fuel costs feed through into wages, inflation expectations and corporate pricing behaviour.

He reiterated that view at the Kisaragi-kai meeting in Tokyo in early June, noting that pass-through from crude oil into broader goods and services prices was likely to be faster than in previous cycles as Japan’s deflationary mindset had faded and firms had become more willing to raise prices.

With a June move effectively a done deal, investors will be looking for a clearer signal on the path beyond this meeting. Rate markets are currently pricing in almost two further hikes by year-end.

Devalier said the challenge for the BoJ is that market pricing has already shifted materially following the more hawkish tone struck at the April Monetary Policy Meeting and Outlook Report. “Against this backdrop, further repricing would require greater conviction that the BoJ can deliver a third hike by year-end, for example at a quarterly pace.”

Fears that the BoJ is already behind the curve have fuelled expectations of a faster pace of tightening in the months ahead.

Analysts say the Japanese central bank appears to be stepping up its hawkish rhetoric even as the government, led by Sanae Takaichi, would prefer rates to remain unchanged.

The administration’s argument is that continued currency intervention can prevent further yen depreciation and reduce the need for higher borrowing costs. However, Société Générale economist Jin Kenzaki argued that intervention alone cannot address concerns that the BoJ is behind the curve or contain the rise in long-term yields.

“If the government continues to block rate hikes, it could ultimately lead to an increase in the fiscal debt-to-GDP ratio and a downgrade of JGBs. That would eventually force a shift in the Takaichi administration’s reflationary policy stance, allowing the BoJ to proceed with rate hikes without hesitation,” the analyst said.