Customers check vegetables and other groceries at the supermarket in Tokyo on June 20, 2025.
Kazuhiro legs AFP Getty images
The main central banks raised their political rates in the face of growing inflation from Covid-19 pandemic-but Bank Japan was a deterrent.
Still, it remained Header and core Inflation Leading above the target 2% from April 2022 and despite the two -year maximum inflation of 4% in January. The so -called “basic” inflation increases above the target since October 2022.
The boy raised rates with only 60 base points within 14 months from March 2024, when it IT abandoned his negative interest rate policy. He maintained a 0.5% policy rate at the last political meeting in June, saying that “the underlying CPI inflation will probably be slow, mainly due to delay in the economy.”
USA The federal reserve raised the rates for the first time since 2018 in March 2022.And every large central bank, except BO, raised its rates this year.
In Japan, the main factor of inflation are food prices, In particular, rice prices.
Rice prices in the country increased rapidly in the second half of 2024 and continued in the first half of 2025, mainly due to poor collections in 2023 and 2024.
In May, Rice prices have increased more than twice, Skayroing 101.7%. This meant the largest increase in over half a century.
Marcella Chow, a global market strategist at JP Morgan Asset Management, noticed that rice is responsible for about half of the basic inflation of Japan, and future inflation trends are strongly dependent on food prices, especially rice.
Temporary rice price?
But despite such a rapid increase in prices, experts found that Bij will not reach the policy rate, because the central bank perceives the increase in inflation as temporary.
BU Governor Kazuo Ueda said at a press conference after the June meeting of BOJ that “when we look at the latest data, consumer inflation increases by about 3%. But this is mainly caused by rising costs of import and rice prices … Comments translated by Reuters.
Chow JPM noticed that Ueda also indicated that the inflation underlying, more emphasis on the BOO, remains below 2%. The boy does not publicly disclose components that define “basic inflation”.
“This indicates that the Central Bank believes that the recent increase in rice prices is temporary,” she said, adding that “Mr. Ueda does not think that the boy is lagging behind, taking into account that the upward trend in inflation is not accelerating.”
Yujiro Goto, the head of the monetary strategy for Japan in the nomor, said CNBC that the current increase in inflation, especially in the case of food inflation, is mainly due to supply problems, not strong demand.
“Therefore, BOJ estimates that the bank does not have to respond to an increase in inflation, which is only cost inflation. Compared to cost inflation, foot increases may not be very effective in slowing down inflation,” Goto said.
This view is supported by Kei Okamura, wallet manager at Neuberger Berman, who said “Squawk Box asia“This price pressure from food will probably fall over the next few months.
Growth concerns
Painting concerns are another important reason why the BOOK will probably stop the lifting rate.
On Wednesday, the summary of the opinion of the BOJ from the June meeting revealed that some members of the board expressed that the rates should be kept at current levels.
Higher rates generally help reduce inflation, but can also limit economic growth.
Chow pointed out that, above all, geopolitical uncertainty will above all be geopolitical uncertainty, including the upcoming election to the House, as well as the uncertainty of tariffs and trade. She said that the election could be political challenges for the ISIB administration.
They can be a risk of growth, which means that the increase in politics may occur later than before.
Goto Nomury is also a view that concerns about growth will stop the BOZ due to foot increases, given that Japan has not reached agreement with the USA regarding trade.
“Due to the higher tariffs for Japan (10% of universal tariffs plus sectoral tariffs, such as car and steel), we expect that the Japanese economy will record a small negative growth in July-shooting, which guarantees a pause on time, at least until September this year,” said CNBC.
Japan is currently closed in commercial negotiations from the USA without a clear sign of the contract. June 20, the highest trade negotiator in the country Ryosei Akazawa said supposedly Trade negotiations from the USA “remained in the fog”.
If both parties do not reach a contract, 25% “mutual” tariff will be hit in Japanese imports to the USA
The boy faces a hard, narrow path forward, it must raise quickly enough to prevent the expectations of inflation in shooting, but not very fast to see how the economy will return to earlier deflating Morass.
Frederic Neumann
Chief economist Asia, HSBC
Lifting indicators can strengthen Jen, which would make Japanese export to be less competitive and limit growth when the export -oriented economy is in the face of winds.
Country Latest commercial data He revealed that Japan exports in May fell by 1.7% year on year, which means the sharpest decrease from September 2024.
Japanese domestic product also He fell for the first time in the yearFalling by 0.2% of the quarter per quarter within three months ended in March, because exports dropped rapidly.
“Hard, narrow path forward”
Boj can also take history lessons. Frederic Neumann, chief economist Asia in HSBC, told CNBC that the boy experienced decades of permanent deflation pressure and “several episodes of false dawn that caused premature strengthening.”
Therefore, the bank now devotes its time to normalizing politics. Neumann noticed that the boy was slowly approaching raising rates because The increase in inflation was mainly powered by acute shock absorption of Japanese yen, with only the “initial sign of the price of remuneration”.
However, a member of the management board of Bij, Naoka Tamura, said on Wednesday in a speech that the bank may need to raise interest rates “definitely” if the risk increase for prices.
From April 2022, Japanese yen Weakened with about 120 yen in relation to the dollar to the current levels around 150. In 2024 the currency weakened to 161.99 July 3, which is the weakest level in relation to the dollar in about 38 years.
Separately, Neumann said: “The period of exceeding inflation may probably be necessary to shake Japanese households and enterprises from their expectations regarding limited price over time.”
He said that at least the BOJ approach “Go -it-Ilow” is justified, Japanese cash officials must be cautious in terms of policy normalization too late.
“The boy faces a hard, narrow path forward, he must raise quickly enough to prevent the expectations of inflation in shooting, but not very fast to see how the economy returned to earlier deflating Morass.”