Former BOJ economist Seisaku Kameda confirms the central bank's rate hike to 1% remains on track, with October or December as the next likely move, as the Iran deal removes energy-driven inflation risks without altering the normalization path.
BOJ to Raise Rates to 31-Year High Amid Iran Deal Uncertainty
The Bank of Japan (BOJ) is poised to hike its policy rate to 1% on Tuesday, marking the highest short-term rate in 31 years. Former BOJ chief economist Seisaku Kameda stated that the recent U.S.-Iran peace deal, which includes a framework for reopening the Strait of Hormuz, is unlikely to disrupt the central bank's normalization trajectory. The move, initially targeted for April, was delayed due to Middle East tensions but now proceeds as markets price in a steady tightening pace.
Kameda emphasized that while the deal may ease near-term energy-driven inflation pressures, the BOJ's twice-yearly rate hike cadence remains intact. The next policy adjustment is expected in October or December, with a Reuters poll projecting rates to reach 1.25% by the fourth quarter. The BOJ's July and September meetings are seen as unlikely to yield action amid lingering geopolitical uncertainties.
Deputy Governor Uchida to Lead Communication
Governor Kazuo Ueda will miss the two-day meeting due to hospitalization for an infected liver cyst, shifting communication duties to Deputy Governor Shinichi Uchida. Known for his cautious rhetoric, Uchida is expected to maintain constructive ambiguity on timing while signaling readiness to act if needed. This approach aligns with the BOJ's strategy to preserve flexibility without destabilizing markets already pricing in a defined path.
JPY Implications and Market Outlook
The rate hike solidifies the Japanese yen's (JPY) upward trajectory, with USDJPY facing renewed selling pressure. Traders will monitor Uchida's remarks for clues on forward guidance, particularly around the October-December timeline. The removal of the Iran-driven inflation tail risk supports the BOJ's base case, though elevated uncertainty in the Middle East could cap aggressive tightening expectations. Technical indicators suggest key resistance levels for USDJPY near 145.00, with support at 142.00.
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