Overview

• The Bank of Japan is widely expected to maintain its short-term policy rate at 0.5% at the June 16-17 meeting to assess economic signals.
• Insiders say the BOJ will consider reducing the pace of its bond purchase taper from next fiscal year to ease potential market disruptions.
• Governor Kazuo Ueda reiterated that any further rate hikes will depend on conviction that demand-driven inflation is sustainably approaching 2%.
• Japan’s core inflation has exceeded the BOJ’s 2% goal for over three years and reached 3.5% in April, largely due to a 7% jump in food prices.
• The opposition Constitutional Democratic Party has called for lowering the BOJ’s inflation target toward zero to give the central bank greater flexibility in future policy adjustments.