Expert: BOJ Rate Hike Benefits Economic Health; Fed Expected to Hold Rates Steady

(Central News Agency reporter Hsieh Yi-hsuan, Taipei, June 16) Lin Chi-chao, Chief Economist at Cathay United Bank, stated that Japan is facing significant inflationary pressure due to yen depreciation, and this rate hike is healthier for the overall economy. Regarding the United States, he believes the new Federal Reserve Chair is unlikely to make drastic moves, and expects the Fed's upcoming meeting this week to keep interest rates unchanged.

The Bank of Japan (BoJ) announced today, after its monetary policy meeting, that it will raise its benchmark interest rate from approximately 0.75% to 1.0%. This marks the highest level since 1995—31 years ago—and is the first rate hike by the BoJ since December last year.

Lin Chi-chao, Chief Economist at Cathay United Bank, stated today at the '2026 Second-half Global Economic and Market Outlook' press conference that Japan is experiencing rising import-driven inflation, and inflation is expected to rise in the second half of the year, requiring preemptive measures. Although Japan's GDP performance remains stable, the yen-to-dollar exchange rate is hovering around 160 yen per dollar. While this benefits export-oriented firms, households are feeling the heavy burden of import inflation. If the yen continues to depreciate, it could suppress consumer spending. Therefore, this rate hike aims to curb the pressure from depreciation and is healthier for the overall economy.

Lin noted that the impact of this rate hike on the yen exchange rate is limited, and future movements will still largely depend on the U.S. Federal Reserve's monetary policy.

With multiple countries announcing interest rate decisions this week, Lin believes central banks will remain cautious in the short term, as global markets are closely watching whether the reopening of the Strait of Hormuz will restore shipping volumes to late February levels.

Regarding the U.S. Federal Reserve's upcoming rate decision meeting, Lin expects rates to remain unchanged. He explained that Kevin Warsh, the new Fed Chair, is presiding over his first meeting, and the likelihood of major actions is low due to the need for coordination with other members. He anticipates that the Fed's meetings in June, July, and September this year will also keep rates unchanged.

Lin stated that current inflationary pressure in the U.S. is primarily driven by temporarily high oil prices. Over time, with base effects, inflation data is expected to decline next year.

Taiwan's central bank will also hold its board meeting on the 18th. Lin mentioned that Taiwan's average CPI year-on-year growth from January to May this year was 1.52%. With fuel prices remaining frozen, inflation remains subdued, leaving little room for rate hikes. (Edited by Chang Liang-chih) 1150616