Japan’s central bank is about to do something it hasn’t done in over three decades. The Bank of Japan is widely expected to raise its benchmark interest rate to 1% at its June 15-16 policy meeting, a level not seen since 1995.
What’s driving the hike
The anticipated move would lift the BOJ’s uncollateralized overnight call rate target from 0.75% to 1%. The previous increase came in December 2025, when the rate was bumped to 0.75%.
The catalyst this time is familiar: inflation that won’t sit down and behave. A depreciating yen has been making imports more expensive, while rising energy costs, fueled in part by ongoing geopolitical tensions in the Middle East, have added fuel to inflationary pressures.
The market has already made up its mind on this one. A Reuters poll found that 94% of economists expect the June rate hike to happen. Market pricing supports that view, with over 80% probability baked into current expectations.
