The BOJ hiking to 1% on Tuesday would mark the highest short-term policy rate in 31 years and represents a significant JPY catalyst regardless of the Iran deal outcome. The former economist’s framing, that the peace deal may reduce pressure for faster hikes but does not alter the twice-yearly cadence, is a nuanced signal: it closes the door on accelerated tightening priced in by some following the energy shock, while confirming the base case is intact. Uchida’s press briefing on Monday will be the key communication event with Ueda absent due to hospitalisation; expect constructive ambiguity on October versus December for the follow-on move. The Reuters poll consensus of 1.25% by Q4 gives the market a firm forward rate anchor. JPY bulls will note that the path of least resistance remains higher rates; the Iran deal removes an upside inflation tail risk rather than the hiking trajectory itself.
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Former BOJ economist Kameda says Tuesday’s expected hike to 1% — a 31-year high — remains on track despite the Iran peace deal, with October or December the next likely move.
Summary:
Sources: Reuters interview; Seisaku Kameda, executive economist, Sompo Institute Plus; Reuters poll
- Former BOJ chief economist Seisaku Kameda said the U.S.-Iran peace deal is unlikely to alter the central bank’s rate-hike plans
- The BOJ is expected to raise its policy rate to 1% on Tuesday, a 31-year high, with the move largely anticipated since April before the Middle East conflict intervened
- A smooth Hormuz reopening may ease pressure for faster-than-expected hikes but will not change the pace of roughly twice a year
- The next hike after June is expected in October or December; a Reuters poll projects rates reaching 1.25% in Q4
- Deputy Governor Uchida will brief markets on Monday after the two-day meeting; Governor Ueda is absent, hospitalised for an infected liver cyst
- Uchida is expected to signal readiness to act nimbly while avoiding explicit forward guidance on timing
The Bank of Japan is set to raise its short-term policy rate to 1% on Tuesday, a level not seen in 31 years, with the Iran peace agreement doing little to alter the trajectory, according to former BOJ chief economist Seisaku Kameda.
Kameda, now executive economist at Sompo Institute Plus and described as remaining in close contact with incumbent policymakers, told Reuters the hike had effectively been a matter of when rather than if, with April the original target before the Middle East conflict introduced sufficient uncertainty to delay action. The ceasefire and Hormuz reopening framework announced over the weekend removes some of that uncertainty, but Kameda was explicit that the BOJ’s normalisation path, rate increases at a pace of approximately twice annually, remains unchanged.
A smooth strait reopening could reduce pressure to tighten faster than planned in response to energy-driven inflation, but the baseline holds. After June, the next move is expected at either the October or December meeting. The BOJ holds a July meeting and a September meeting in between, both of which Kameda indicated were unlikely to produce action given the still-elevated uncertainty over the Middle East implementation period.
The communication burden on Tuesday falls to Deputy Governor Shinichi Uchida, who will brief markets after the two-day meeting concludes. Governor Kazuo Ueda is absent, receiving hospital treatment for an infected liver cyst. Kameda characterised Uchida as skilled at constructive ambiguity, a communication style suited to a moment when the BOJ wants to preserve optionality without spooking markets that have been pricing a defined path.
A Reuters poll of economists places the policy rate at 1.25% by the fourth quarter
