MNI INTERVIEW: Ex-BOJ Sakurai Sees Next Hike After April 2026

The Bank of Japan is unlikely to raise interest rates before April 2026, as it must carefully assess the likelihood and scale of wage hikes next year amid high uncertainty driven by U.S. tariffs, former board member Makoto Sakurai told MNI.

Sakurai, who maintains close contact with BOJ officials after his departure in 2021, said the Bank will hold the 0.5% policy rate for at least a year as board members grapple with a wages outlook clouded by the impact of U.S. tariffs. 

“If U.S. trade policy stabilises smoothly and favourably, a hike this year could be feasible, but that’s unlikely,” he argued, declining to offer a more specific timeline for future rate increases.

Clear evidence of wage hikes will not be available until April 2026 and declining profits – particularly among the industry leading, tariff-impacted automakers – will limit wage growth next year, he added. Though structural labour shortages persist, the Bank cannot maintain its earlier optimism on wage growth, given the shifting economic fundamentals, he said.

The BOJ must also monitor corporate profits for the April-September period before considering further increases, he added. Profit rather than interest rates drives corporate capital investment, Sakurai argued, noting weakened earnings and economic uncertainty will drive caution among the country's firms.

Sakurai predicted in February that the BOJ would raise the policy rate further by April, following the Bank's 25 basis point move higher in January. (See MNI INTERVIEW: Ex-BOJ's Sakurai Sees Hike By As Early As April) However, the BOJ has kept the rate on hold amid global volatility triggered by U.S. tariffs, prompting markets to scale back expectations for further policy normalisation this year.

TRADE IMPACTS

The yen is likely to continue appreciating gradually amid the BOJ’s dovish stance, which could reduce overseas earnings for Japanese firms, particularly if it rises above JPY140 against the greenback, Sakurai noted. 

Financial market volatility will remain elevated amid uncertainty over U.S. monetary policy, particularly as the Federal Reserve weighs rising unemployment and inflation, he said, adding markets should closely watch the Fed’s June Summary of Economic Projections. 

However, Sakurai warned high uncertainty will likely extend through at least July 9, when U.S. President Donald Trump is set to decide on additional “reciprocal” tariffs. Trump is also unlikely to compromise on auto tariffs, a key sticking point for Japan, he cautioned.