BoJ June Minutes Say Rate Hikes Can Also Stabilize Yields

2026-08-05

Long-term yields and rate-hike decision

The Bank of Japan on the 5th released minutes of its June 15-16 monetary policy meeting. Several policy board members said the recent rise in long-term yields reflected growing inflation concerns, and that raising the policy rate would also help stabilize long-term yields.

At the June meeting, the BOJ raised the policy rate to 1.0% from 0.75%, saying higher crude oil prices tied to heightened tensions in the Middle East had increased the risk of an upside surprise in prices. Governor Kazuo Ueda was absent because he was hospitalized for treatment of an infectious disease, and the rate hike was approved by a 7-1 vote among the eight policy board members excluding Ueda.

Price outlook and yen weakness

Most members saw a risk that the underlying pace of price increases could exceed 2% on the impact of events in the Middle East. They said pass-through of higher crude prices among companies was proceeding at a somewhat faster pace, and that the impact could spread to consumers going forward.

One member also referred to the weaker yen, saying cost increases through higher import prices were weighing on small and medium-sized firms, and added that 'adjusting the degree of easing is more appropriate than before.'

Bond purchase cuts and outlook

At the June meeting, the BOJ also decided to end the measure of reducing the amount of government bond purchases after April 2027. Most members said that, given progress in the cuts that began in August 2024, the need to further improve market functioning was gradually diminishing. Many said the recovery in government bond holdings by private investors would take time, and that continuing the cuts at the same pace as before could have unforeseen effects on market stability.

On the pace of future rate hikes, one member said, 'We need to move toward the neutral rate as early as possible so that flexible policy decisions can be made.' Another member said, 'To avoid a sharp and large rate hike in the future, the policy rate should be moved toward the neutral rate earlier.' An official from the Cabinet Office said of the rate-hike decision that 'it is important to fulfill accountability and to respond independently and appropriately if excessive economic fluctuations occur.' Economy and fiscal policy minister Minoru Kiuchi attended the June 16 meeting as the government representative.

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