BOJ's Policy Path Remains Firm Amid Geopolitical Shifts
Seisaku Kameda, former chief economist of the Bank of Japan, commented that recent developments toward a peace agreement between the US and Iran are unlikely to fundamentally alter the central bank's scheduled interest rate adjustment path, even if it leads to a smoother reopening of the Strait of Hormuz.
Balancing Inflation Pressures with Rate Hike Tempo
Kameda noted that an easing of Middle East tensions could reduce uncertainty in global energy supply, potentially alleviating some of the imported inflation pressures facing Japan. This might allow the BOJ slightly more leeway in the pace of its rate increases aimed at curbing price growth.
However, he stressed that this is merely a buffer provided by the external environment and does not change the core objective of monetary policy normalization. The BOJ's plan remains to gradually raise real borrowing costs—which are still historically low—and bring its ultra-loose policy back to normal, likely maintaining a pace of around two rate hikes per year.
Clear Hike Expectations and Leadership Change
Kameda explicitly forecasted that following the widely anticipated hike this week, the BOJ's next rate increase is highly probable in the fourth quarter, with October or December being the likely windows.
Furthermore, the upcoming policy meeting's press conference will be led by Deputy Governor Shinichi Uchida, as Governor Kazuo Ueda is receiving medical treatment. Kameda expects Uchida to clearly communicate the bank's resolve to continue policy normalization. However, given the lingering uncertainties in the Middle East, the deputy governor may adopt a more cautious tone regarding the timing of the next hike, avoiding overly specific forward guidance.