Bank of Japan policy board member Yoichi Sōichi said on Thursday (May 14) that the central bank should raise interest rates as soon as possible unless there are clear signs of an economic slowdown. This statement suggests that Sōichi, who voted to keep interest rates unchanged at the April policy meeting, may join the opposition at the June meeting and call for a rate hike. Currently, concerns about inflationary pressures are intensifying within the Bank of Japan, with three of the nine board members voting to raise interest rates to 1.0% at the April meeting.

Add a line: Raising interest rates as soon as possible is a "desirable move".

In his speech, Zeng Yi said, "I personally believe that the situation at the April meeting does not support a hasty interest rate hike. But even so, if the data does not show clear signs of an economic downturn, I think it would be advisable to raise interest rates at the earliest possible stage."

This statement is noteworthy—the People's Bank of China voted to keep the interest rate unchanged at 0.75% at its April meeting, but his latest remarks indicate that his stance is shifting towards a hawkish position. If he joins the opposing camp at the June meeting, the number of votes supporting a rate hike will increase from 3 to 4 or even more.

Inflationary pressures stem from the war in Iran, but have begun to permeate broader sectors.

Zeng Yi acknowledged that the price increases in fuels and chemicals caused by the war in Iran may be a "temporary shock," but he also warned that these costs could further push up already rising distribution costs, thus creating lasting price pressure.

“The behavioral patterns rooted in deflation are being broken, and Japan has clearly entered an inflationary phase,” said Masakazu. “Therefore, it is crucial now to ensure that the potential inflation rate does not exceed 2% through timely and appropriate policy interest rate increases.”

The Bank of Japan's interest rate hike path is becoming clearer; the June meeting will be a key juncture.

The Bank of Japan exited its decade-long massive stimulus program in 2024 and has raised interest rates multiple times (including last December), citing Japan's expectation of sustainably achieving its 2% inflation target. The current policy rate of 0.75% aligns with the OECD's recommended path of raising rates to 2% by the end of 2027.

At its April meeting, three committee members voted to raise interest rates to 1.0%, demonstrating growing internal concern about inflationary pressures triggered by energy shocks. With the Bank of Japan signaling a "rate hike as soon as possible," the June 15-16 meeting could be a turning point for the Bank of Japan to accelerate its tightening.

The growing hawkish faction within the Bank of Japan warrants market attention to the risk of a June rate hike.

Overall, the Bank of Japan's latest statement signals a further hawkish shift within the central bank. Although he previously supported keeping rates unchanged in April, his explicit call for an "early rate hike," coupled with three dissenting votes from committee members, means the probability of a rate hike to 1.0% at the June meeting is increasing. Given the backdrop of the Iran war driving up energy costs and persistently rising inflation expectations in Japan, the market needs to be wary of the risk of the Bank of Japan tightening monetary policy prematurely.

USD/JPY is bearish in the short term.

The Bank of Japan's interest rate hike will directly narrow the interest rate differential between the US and Japan, a change that will provide strong fundamental support for the yen.

According to the daily chart of USD/JPY, the current price is trading around 157.91, and the moving average system shows a complex pattern of high convergence followed by slight divergence.


(USD/JPY daily chart, source: FX678)

In terms of moving average alignment, MA50 (158.70) > MA20 (158.19) > MA100 (157.37) > MA200 (154.41). The short-term moving average MA20 and the medium-term moving average MA50 are basically in sync, with a gap of less than 0.5 points, and both are above the current price—the current price of 157.91 has fallen below MA20 (158.19) and MA50 (158.70), but is still above MA100 (157.37). This is a bearish structure with "short-term moving averages acting as resistance above, medium-term moving averages even higher, and the price barely holding above the long-term moving averages."

This pattern of "short-term bearishness with medium-term support" typically appears during pullback phases in an uptrend, rather than at the initial stage of a trend reversal. Looking at the moving average slopes, the 20-day and 50-day moving averages (MA20 and MA50) are flattening, suggesting that short-term upward momentum is weakening; while the 100-day and 200-day moving averages (MA100 and MA200) maintain their upward slopes, indicating that the medium-term trend has not yet reversed.

At 14:09 Beijing time on May 14, the USD/JPY exchange rate was 157.87/88.