*What: Bank of Japan policy meeting
*When: June 14-15, policy decision likely around 1-2 p.m.
(0400-0500 GMT) June 15
*Key overnight call rate target seen staying at 0.5 percent
By Hideyuki Sano
TOKYO, June 12 The Bank of Japan is seen keeping
interest rates on hold this week as it awaits more proof that the
Japanese economy will keep expanding solidly and consumer prices
will rise, enabling it to hike rates in months ahead.
Recent economic data has generally been solid, underscoring
the financial market view that the central bank will notch up
rates sometime in the July-September quarter, most likely in
BOJ officials have also said the economy has been growing in
line with the bank's forecasts, so there is no reason to change
its line on raising interest rates gradually.
Many market players take that to mean a pace of roughly one
rate hike every half year or so, making August a favourite after
the BOJ's last rate hike in February.
"I don't think the BOJ will have enough reasons for raising
rates just yet," said Akihiko Inoue, a market analyst at Mizuho
Investors Securities. "They will probably raise rates in August
after seeing April-June GDP figures."
Economic data in the past month has supported the view that
the economy is growing steadily, mostly in line with the BOJ's
A strong corporate survey last week eased concern that
capital spending, a major engine of the economy, may be losing
steam, while the unemployment rate hit a nine-year low of 3.8
percent in April, which may signal that a tighter job market
could lead to rises in wages and push up prices.
The fall in consumer prices also eased to 0.1 percent in
April from 0.3 percent in March.
Many economists -- including those at the BOJ -- think
consumer prices will start rising again later this year.
Anecdotal evidence is also mounting that more companies are
willing to raise prices. McDonald's Japan 2702.Q, which became
a symbol of Japan's deflation debacle as it cut its hamburger
prices sharply more than a decade ago, now plans to raise prices
in big cities.
Some BOJ officials also said consumers may no longer feel
prices are falling, as CPI falls in recent months are largely due
to drops in a limited number of goods prices, such as flat TVs.
TANKAN AND ELECTION
Many BOJ officials say they want to see the bank's tankan
corporate sentiment survey due out in early July to confirm that
their expected economic scenario is playing out.
Some market players think the BOJ could raise rates after
Indeed, BOJ policy board member Atsushi Mizuno said in an
interview late last month that he thought the bank could discuss
a rate hike as early as July.
Mizuno, known as one of the most hawkish on the bank's
nine-member board, may propose a rate hike then, but analysts say
most board members are likely to want a bit more time.
"If they raise rates in July, that could give the impression
they have hastened the pace of rate hikes," said Naomi Hasegawa,
senior strategist at Mitsubishi UFJ Securities.
The BOJ scrapped its zero rate policy and raised rates to
0.25 percent last July, and then hiked them again to 0.5 percent
Many market players also think the BOJ may not want to move
in July, when an upper house election is due, even though the
central bank says the political calendar will not affect its
BOJ Governor Toshihiko Fukui has made it clear he won't be
dropping any big hints on when the bank will move, as some other
central bankers do, but his comments on the economy will be
closely scrutinised at 3:30 p.m. (0630 GMT) on Friday when he
holds his post-meeting news conference.