BOJ lifts rates to highest since 1995, as expected

16th Jun 2026 07:53

(Sharecast News) - The Bank of Japan lifted its policy rate on Tuesday from 0.75% to 1% - the highest level since 1995 - in line with expectations.

The vote was split 7-1, with Governor Ueda absent due to hospitalisation and newly-appointed Toichiro Asada casting the dissenting vote.

The Bank also said it would keep its bond buying unchanged at around 2 trillion yen per month.

In its statement, the BOJ highlighted the risk of inflation breaching the 2% target. It said the price pass-through stemming from the rise in crude oil prices has been progressing "at a relatively fast pace" in business transactions, and this could spread to an increase in consumer prices across a wide range of items.

Against this backdrop, there is a risk that underlying CPI could rise above the price stability target of 2%, it said.

The BOJ said: "Japan's economy has recovered moderately, although some weakness has been seen in part, partly due to the impact of the situation in the Middle East. While higher crude oil prices have been exerting downward pressure on economic activity, the economy has generally been supported by factors such as high levels of corporate profits and an improvement in the employment and income situation.

"Meanwhile, the risk of a significant slowdown in the economy appears to have decreased compared with a while ago. This is mainly because the effects of the government's various measures including those to reduce the household burden of higher energy prices will continue to provide support, and progress has been made in securing alternative sources of supply for raw materials that are highly dependent on the Middle East. Against this backdrop, Japan's economy has been developing generally in line with the baseline scenario, which expects that the economy will continue growing moderately, albeit at a decelerated rate."

ING said: "The timing of the next hike should depend heavily on the situation in the Middle East. The possibility of an October hike increases if a long-term peace deal is made soon."