Bank of Japan Likely to Raise Rates in June as Stagflation Pressures Policy Space

Gate News message, April 28 — Yuxuan Tang, a strategist at JPMorgan Private Bank, said the Bank of Japan kept rates unchanged in its first formal response following the Middle East conflict and recent yen weakness, but a 6-3 voting split signals a high probability of a rate hike as soon as June.

This expectation has already been largely priced into markets, with investors betting on approximately two rate hikes for the remainder of 2026. "The threshold for the BOJ to significantly exceed this pace is high," Tang said. Japan is walking a tightrope of stagflation: elevated energy prices combined with the country's low energy self-sufficiency among major economies makes it more vulnerable to external shocks, while costly subsidy programs and other fiscal measures are expected to strain public finances.

Against this backdrop, the Bank of Japan may need to maintain a relatively accommodative policy stance to cushion weakening demand.