Ueda Reaffirms BOJ Will Raise Rates When Appropriate, Terminal Rate Expectations Rise to 1.75%
Alina Collins
BOJ Governor Kazuo Ueda reiterated Wednesday that further rate hikes are coming, with the benchmark already at 1% — the highest since 1995; market expectations for the terminal rate have shifted up from 1.5% to 1.75%, yet the yen still hovers near a 40-year low.
What did Ueda actually say?
He said underlying inflation is approaching 2% and financial conditions remain accommodative — the BOJ expects to keep raising rates.
Timing and pace will depend on the impact of the Iran war and other factors.
This means → the direction is locked in; the only open question is how fast and how far each step goes.
The speech was read by Deputy Governor Ryozo Himino — Ueda had been hospitalized for a liver cyst infection and returned to work only on Tuesday.
What signal did last week's hike send?
The policy board voted 7-to-1 to raise the benchmark rate to 1%, the highest since 1995.
Minutes from the June 15–16 meeting, released the same day, showed board members explicitly signaling further hikes ahead.
In plain terms = this is not one governor's preference — nearly the entire board is aligned on moving rates higher.
Is inflation actually high or low?
Core inflation — price growth excluding volatile food items — held at 1.4% in May, still short of the 2% target.
Producer-side pressure is sharper: the May PPI (producer price index, measuring factory-gate prices) rose 6.3% year-on-year, the fastest in over three years, driven mainly by energy costs.
This means → consumers are insulated for now because government subsidies absorb part of the increase, but cost pressure is building on the corporate side and will eventually feed through to retail prices.
Where does the market expect rates to peak?
Economists have raised their terminal-rate forecast — where the hiking cycle ultimately stops — from 1.5% to 1.75%.
Roughly 90% of surveyed economists expect the BOJ to move again before December; over a third see October as the next window.
This reflects a consensus shift: the question is no longer *whether* the BOJ hikes, but *when and by how much*.
Why is the yen still falling?
The yen traded at 161.70 per dollar as of press time, hovering near a 40-year low.
Rate hikes should in theory support the currency, but the effect has been limited — rising expectations for Fed hikes this year keep pressing the yen down.
In plain terms = Japan is raising rates, but U.S. rate expectations are climbing too, so the interest-rate gap has not meaningfully narrowed — the yen stays weak.
Persistent yen depreciation means imported inflation intensifies for this resource-importing nation — a variable the BOJ must weigh when calibrating its hiking pace.
Content is for reference only, not financial advice.