Takaichi Sanae Accepts BOJ Rate Hikes as Deputy Governor Warns of Risks from Delayed Tightening
Miles Bennett
PM Sanae Takaichi raised no objection in parliament to the BOJ's hike to the highest rate since 1995, while Deputy Governor Ryozo Himino warned that delaying tightening risks letting inflation overshoot — yet Takaichi is quietly stacking the board with doves, narrowing the hawks' window to act.
Why did Takaichi suddenly stop objecting?
Takaichi has long championed easy money, publicly pressing BOJ Governor Kazuo Ueda to "fully consider the government's position."
Yet after last week's hike to the highest benchmark rate since 1995, she told parliament only that she "looks forward to close coordination" — no pushback at all.
This means → she verbally accepted the outcome. Markets read it as tacit consent.
What exactly did the deputy governor warn?
Deputy Governor Ryozo Himino said at the same session: if the BOJ delays necessary adjustments to monetary easing while underlying inflation risks overshooting the 2% target, those risks could materialize and drag on the economy.
In plain terms = his message is "stop raising rates now and prices may spiral — making the eventual economic damage worse."
This reflects the BOJ's internal view: underlying inflation carries real overshoot risk, and the window to act is not open-ended.
Takaichi accepts on paper — what is she doing in practice?
Reflationist board member Toyoichiro Asada, whom Takaichi pushed to appoint, cast the only dissenting vote at last week's rate decision.
She will seat another reflationist this month, replacing outgoing member Junko Nakagawa.
This means → Takaichi is not blocking hikes head-on, but she is steadily shifting the board's voting balance through appointments.
How long do the hawks have?
The board's two most committed hawks — Hajime Takata and Naoki Tamura — see their terms expire roughly a year from now. That hands Takaichi another chance to reshape the board.
Harumi Taguchi, chief bond strategist at Mitsubishi UFJ Morgan Stanley Securities, noted the BOJ "may not have much time to keep pushing rates toward neutral" and will likely try to compress easing as much as possible before next summer.
Citi economist Sosuke Nakamura was blunter: if Takata and Tamura are replaced by more dovish members, "the balance of power could tilt decisively toward the doves."
Why does the inflation number look so low?
May national CPI rose just 1.4% year-on-year — but that figure is suppressed by government energy subsidies. Takaichi's cabinet recently drew up an extra budget to keep cushioning households against the Middle East crisis.
The BOJ sees it differently: high energy prices from the Middle East conflict will put significant upward pressure on inflation.
In plain terms = headline CPI looks tame because the government is paying to hold it down. Once subsidies fade, the real inflation pressure resurfaces.
What is the market pricing in?
A Bloomberg survey after the June meeting: more than half of economists expect the next hike in December; 36% expect October.
The market's median forecast for the terminal rate — the peak of this hiking cycle — has risen from 1.5% to 1.75% since early this month.
The single variable to watch: the tension between Takaichi's verbal acceptance and her dovish appointments — and whether the BOJ can tighten enough before the hawks' window closes.
Content is for reference only, not financial advice.