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<h2 id="b-tldr-b">TLDR:</h2>
<ul>
 <li>Bank of Japan raised its short-term policy rate to 1%, a 31-year high, shifting focus to inflation risk.</li>
 <li>Ex-BOJ member Sakurai says another rate hike by year-end is locked in, targeting October or December</li>
 <li>Sakurai projects the BOJ policy rate will reach around 2% by early 2028 under Governor Ueda’s term.</li>
 <li>Japan’s weak yen and expansionary fiscal policy under PM Takaichi complicate the BOJ’s rate outlook</li>
</ul>
The Bank of Japan could raise interest rates twice before the end of the current fiscal year in March, <a href="https://www.reuters.com/world/asia-pacific/boj-may-raise-interest-rates-twice-by-march-says-ex-boj-policymaker-2026-06-19/?taid=6a35189639b3a10001a602cf&amp;utm_campaign=trueAnthem:+Trending+Content&amp;utm_medium=trueAnthem&amp;utm_source=twitter" rel="noopener noreferrer nofollow">according to</a> former board member Makoto Sakurai. The central bank raised its short-term policy rate to 1% this week, marking a 31-year high. 
Sakurai described the move as a major turning point, noting the BOJ has shifted its focus toward combating mounting inflation risk rather than simply tracking progress toward its 2% target.
<h2 id="b-boj-s-policy-shift-signals-growing-inflation-alarm-b">BOJ’s Policy Shift Signals Growing Inflation Alarm</h2>
The <a href="https://blockonomi.com/boj-rate-decision-looms-what-japans-corporate-funding-crisis-means-for-crypto-markets/" rel="noopener noreferrer nofollow">BOJ’s</a> latest rate decision stood apart from previous hikes in a key way. Past increases were framed around confidence in sustainable inflation progress. This week’s move, however, was justified as a measure to forestall the risk of inflation exceeding the 2% target.
Sakurai, who retains close contact with current policymakers, called this a landmark shift. <cite>“It was a major turning point in monetary policy as it meant the BOJ was now clearly shifting focus to beating inflation,”</cite> he said. The change in framing carries broader consequences for how future rate decisions may be justified.
“It showed the bank’s growing alarm over inflation risk. The implication for future rate decisions could be huge,” Sakurai added. A recent spike in wholesale inflation is expected to filter through to consumer prices in the coming months.
Sakurai said the pace of consumer price acceleration over July through September will be the critical variable in determining the timing of the next hike. 
“Another hike by year-end is pretty much locked in,” he said. He added the BOJ would likely move in either October or December, depending on incoming <a href="https://moneycheck.com/spacex-ipo-inflation-data-and-tech-earnings-dominate-this-weeks-market-calendar/" rel="noopener noreferrer nofollow">inflation data.</a>
<h2 id="b-rate-path-and-fiscal-policy-risks-complicate-outlook-b">Rate Path and Fiscal Policy Risks Complicate Outlook</h2>
If inflation stays within expectations, the bank may wait until December before acting. However, if prices accelerate at an alarming pace, Sakurai said the <a href="https://parameter.io/bank-of-japan-pushes-rates-to-1-what-this-historic-move-means-for-cryptocurrency-markets/" rel="noopener noreferrer nofollow">BOJ</a> could raise rates in October and again before March. 
He noted that strong corporate profits and a tight labor market make inflationary risk the dominant concern.
“Corporate profit is strong and the labour market is tight, so inflationary risk will outweigh the risk of economic downturn,” Sakurai said. 
“If so, the BOJ will maintain its focus on combating inflation.” He projected the policy rate would reach around 2% by early 2028, when Governor Kazuo Ueda’s term ends.
Conflict in the Middle East has added complexity to the rate outlook. Higher energy costs are fueling inflation while simultaneously squeezing Japan’s oil-dependent economy. A persistently weak yen is pushing up import costs and broadening inflationary pressure across sectors.
Sakurai pointed to a deeper structural tension between monetary and <a href="https://coincentral.com/u-s-debt-reaches-38-5-trillion-analysts-warn-of-fiscal-dominance-shift/" rel="noopener noreferrer nofollow">fiscal policy.</a> Prime Minister Sanae Takaichi’s expansionary stance, including a 3 trillion yen extra budget funded by new debt, runs counter to the BOJ’s tightening efforts. 
“The problem with Japan is a lack of consistency between the BOJ’s efforts to tame inflation and expansionary fiscal policy that works to fuel inflation,” he said. “Unless this is fixed, there is no way out from Japan’s weak-yen problem.”
The post <a href="https://blockonomi.com/bank-of-japan-may-raise-rates-twice-by-march-as-inflation-risk-mounts-ex-policymaker-warns/" rel="noopener noreferrer nofollow">Bank of Japan May Raise Rates Twice by March as Inflation Risk Mounts, Ex-Policymaker Warns</a> appeared first on <a href="https://blockonomi.com" rel="noopener noreferrer nofollow">Blockonomi</a>.

Bank of Japan May Raise Rates Twice by March as Inflation Risk Mounts, Ex-Policymaker Warns

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