The Bank of Japan is signaling a potential rate hike as soon as next month. Minutes from the April 27-28 meeting reveal a growing hawkish shift on the board, driven by inflation pressures from the Iran conflict.
One board member stated it is "quite possible the BOJ will raise rates from the next meeting onward," even with Middle East uncertainty. Another opinion called for a hike "soon barring evident signs of an economic slowdown," while a third urged acceleration "without hesitation" if inflationary risks rise.
The hawkish tone sent the benchmark 10-year Japanese government bond yield to a 29-year high on Tuesday. The central bank kept its policy rate steady at 0.75% last month, but a 3-6 board vote for a hike was rejected amid sharply upgraded inflation forecasts.
Many policymakers now see the Iran conflict fueling second-round inflation effects, potentially bringing the timeline for hitting the BOJ's 2% target forward. The next policy meeting is scheduled for June 15-16.