BOJ Policymakers Debate Price Risks Despite Rate Hike

The Bank of Japan (BOJ) policymakers debated the risks of mounting prices during their June meeting, even after raising borrowing costs to a 31-year high. The minutes of the meeting showed that some board members believed consumer inflation would increase significantly in the latter half of the fiscal year due to planned price hikes by companies.

One member noted that even if the Middle East conflict ends and crude oil prices decline, inflationary pressure would remain due to the high costs of goods. The BOJ had been conducting money market operations in accordance with its guideline for money market operations decided at the previous meeting on April 27-28, 2026.

The uncollateralized overnight call rate had been in the range of 0.726 to 0.728 percent during this period. The Bank had also conducted Japanese government bond (JGB) purchases of about 2.7 trillion yen per month in accordance with the JGB reduction plan decided at the June 2025 meeting.

Some members agreed that the economy was progressing as expected, but risks persisted and inflation could exceed the 2% target. One member noted that FX factors were driving import prices higher, impacting smaller companies, while another member said Japan's real interest rate is unusually low by global standards and must be adjusted given inflation upside risks.