The Bank of Japan may raise interest rates by July as price pressures continue to build.

Ex-BOJ Official Sees Rate Hike by July, Says April Odds 50%

Japan's central bank is likely to raise rates by July, according to a former policy board member. Seiji Adachi said the Middle East war has sent oil costs soaring, raising the risk that the BOJ could fall behind the curve on rising inflation.

Core inflation has already hit the BOJ's 2% target, Adachi noted. Last week's tankan survey showed corporate five-year inflation expectations at 2.5%. The war-driven oil spike and supply constraints give the central bank more reason to hike its short-term policy rate from the current 0.75% soon, he said. "The BOJ would be better off raising rates toward neutral as soon as possible," Adachi said, adding that Japan's neutral rate is likely around 1.25%. But he put the odds of an April hike at "50%" given that the Iran war is keeping markets volatile and clouding Japan's fragile economic outlook.