TOKYO- Inflationary pressure from wage gains and prolonged rises in food costs could prompt Bank of Japan board members to discuss another interest rate hike as soon as in May, said three sources familiar with its thinking.
Whether the BOJ actually hikes rates at the April 30-May 1 meeting, or holds until later this year, will depend not just on the price outlook but how US President Donald Trump’s policies affect financial markets, the sources said on condition of anonymity as they were not authorized to speak publicly.
The BOJ is widely expected to keep policy steady at the March 18-19 meeting, having just raised interest rates to 0.5 percent from 0.25 percent at their previous January meeting, with markets largely tipping the next hike in the third quarter.
“It’s not as if we would hike rates at every meeting,” BOJ Deputy Governor Shinichi Uchida told reporters on Wednesday, essentially ruling out a hike at this month’s meeting.
However, the chance of another rate hike occurring at the May meeting will increase particularly as the BOJ will also issue quarterly growth and inflation forecasts extending to fiscal 2027 for the first time, the sources say.
The yen rose and Japan’s 10-year government bond yield hit a nearly 16-year high on Thursday due in part to expectations of a near-term BOJ rate hike.
