Former Bank of Japan chief economist suggests rate hike possible as early as fall

High inflation could push the Bank of Japan (BOJ) to raise borrowing costs as early as October if trade tariff concerns ease. This was stated by former BOJ chief economist Hideo Hayakawa in a Bloomberg interview. He also said the central bank will most likely keep interest rates at 0.5% during its next meeting in late July, as tariff negotiations continue.

Inflation in Japan has stayed above the 2% target for over three years, Hayakawa noted. At the same time, companies are hiking prices to offset higher costs. However, if the Bank of Japan raises its inflation forecast to 2%, markets could see it as a signal of imminent policy tightening. That's why the central bank might be deliberately keeping its forecasts low.

The Head of the Bank of Japan, Kazuo Ueda, is being cautious because of high economic uncertainty. Hayakawa notes that raising interest rates could hurt economic growth, especially if external factors like tariffs put more pressure on the market.