MNI INTERVIEW: Ex-BOJ's Kameda Sees April Hike Likely

The Bank of Japan Board is likely to raise the policy rate 25 basis points to 1.00% at its April 27-28 meeting if financial conditions are still accommodative despite last year’s hikes, former BOJ chief economist Seisaku Kameda told MNI, warning the Bank risked falling behind the curve.

The BOJ continues to focus on whether wage gains will feed through to prices but is placing greater weight on whether the financial environment remains accommodative as a key policy factor, said Kameda, now executive economist at Sompo Institute Plus. Policymakers raised the policy rate in December, a move Kameda had predicted in November, as they grew confident wage increases would materialise in fiscal 2026 based on various data and corporate hearings, he said. (See MNI INTERVIEW: Ex-BOJ's Kameda Sees Dec Hike, Ueda Not Dovish) 

Kameda added the BOJ is now closely monitoring whether the mechanism in which wages and prices rise moderately in tandem will be sustained.

The Bank will also assess financial conditions through indicators such as bank lending growth, financial institutions’ balance sheet positions and lending attitudes in the upcoming Tankan survey due April 1 and its quarterly branch managers’ meeting in mid-April, as well as conditions in commercial paper and corporate bond markets, alongside other hearings and surveys, in addition to monthly data, he said.

If accommodative financial conditions are confirmed, the BOJ will judge the policy rate has not yet reached the neutral level, allowing further hikes, Kameda argued. 

Markets have currently priced in a 48% chance of a move higher in April. 

NEUTRAL RATE

While economic and price conditions justify a hike to 1% or higher, neutral may lie around 1.25%-1.50%, Kameda said, noting Governor Kazuo Ueda has made clear the BOJ cannot identify the neutral rate in advance. However, rates are unlikely to rise to those levels directly or smoothly given economic fluctuations, making it meaningless to discuss neutral in advance, he continued.

Yen weakness continues to push up import and domestic prices, contributing to inflation, while “home-made inflation” driven by the wage-price cycle is also taking hold. The timing for achieving the BOJ’s price stability target is approaching and, if the Bank refrains from raising rates, it risks falling behind the curve, he warned.

Kameda said it took the BOJ considerable time to assess the impact of tariffs on global and Japanese growth and on wage momentum. As a result, the Bank held rates steady from February to November 2025, increasing the risk of falling behind the curve as inflation overshot its forecasts during that period, he said.

The BOJ board’s median forecast for core-core CPI this fiscal year was revised up to 3.0% in January’s Outlook Report from 2.1% a year earlier, underscoring stronger-than-expected price momentum, he noted. (See MNI BOJ WATCH: Ueda Points To Hikes, Gives No Clues On Timing) Inflation excluding public utility charges and imputed rent has already nearly reached the 2% target, he added.

Kameda also said the BOJ’s January assessment largely reverted to its January 2025 view, prior to heightened U.S. tariff concerns, noting that the Bank had removed the phrase “a virtuous cycle from income to spending gradually intensifies” in April 2025, but reinstated similar language in this year’s report.