BOJ chief's speech eyed for clues on June rate hike amid inflation pressure

Bank of Japan Governor Kazuo Ueda faces a critical juncture as he prepares to deliver a closely watched speech on Wednesday. The address is expected to provide insights into the central bank's thinking regarding a potential interest rate hike in June, a move increasingly anticipated by markets.

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markets will focus on the chance of action if the BOJ signals its intent to keep pushing up rates.

Surging fuel costs, exacerbated by the Iran war, are broadening price pressures across Japan's fragile economy. This situation presents Ueda with a delicate balancing act. While a failure to signal a June hike could further weaken the yen, which has already breached the key 160-per-dollar threshold, offering too clear a commitment risks being derailed by unpredictable geopolitical events.

Despite the uncertainties, factors strongly suggest a June rate hike is probable. The nine-member board is showing growing support, with three members dissenting in April against keeping rates steady and two others recently warning of mounting price pressures. Wholesale inflation reached a three-year high in April, alarming policymakers as firms pass on costs.

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I was with the (BOJ) governor throughout the recent G7 meetings, and I feel our views are very much aligned in many respects.

U.S. Treasury Secretary Scott Bessent has signaled Washington's desire for BOJ rate hikes, stating Ueda would act if granted independence. Japanese Finance Minister Satsuki Katayama also indicated alignment with the BOJ governor's views during recent G7 meetings. However, Ueda may opt for indirect signals, as one board member expressed displeasure over explicit policy guidance in the April meeting summary. Markets will keenly observe any indication of the BOJ's intent to continue raising rates.

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Ueda would do "what he needs to do" if granted independence by Japan's government.