Why is Nomura analyst Michio Saito uncertain about the Bank of Japan raising interest rates in June or July despite high market expectations?

Michio Saito, an executive fellow at Nomura Institute of Capital Markets Research and former key bond policy official at Japan’s finance ministry, acknowledges that 'the time for an interest rate hike has already come, or at least is very close,' but expresses doubt about a smooth path to a BOJ rate hike due to lingering risks from the war in Iran—specifically, the potential for further oil price gains that would weigh heavily on Japan’s energy imports-dependent economy. He warns that if the Strait of Hormuz remains shut, concerns over crude oil and liquefied natural gas supply could escalate to the point where 'economic activity itself will come to a standstill, going beyond mere price increases.'

What does Michio Saito say about current Japanese government bond yields, particularly the 10-year JGB yield, and why does he consider them problematic?

Saito states that Japanese government bond (JGB) yields may have 'overshot' due to excessive concerns about inflation and speculation about increased fiscal spending by the government. He points out that the benchmark 10-year JGB yield rose as high as 2.8% on May 18—the highest since 1996—and argues that this level is 'too high now relative to the rest of the JGB yield curve,' which suggests the 10-year yield should instead be in a range of around 2.0% to 2.5%.

Nomura Analyst Says Near-Term BOJ Hike Still Up in Air Over Iran

May 27, 2026

Nomura analyst Michio Saito warns that geopolitical tensions in Iran could spike oil prices and disrupt energy supplies, casting uncertainty over the Bank of Japan's near-term interest rate hike plans despite high trader expectations.

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