The minutes from the Bank of Japan’s May meeting will be released at 2350 GMT (1950 US Eastern time). A preview has been provided from the bank’s Summary of Opinions during the April 30 and May 1, 2025, Monetary Policy Meeting.

Bank of Japan Governor Kazuo Ueda is scheduled to give a speech at the Annual Trust Association Meeting. The exact time for this address has not been specified.

Japan’s Consumer Price Index

In May 2025, Japan’s Consumer Price Index remained above the Bank of Japan’s target rate. This follows ongoing assessments from the central bank.

The summary from the Bank of Japan’s late-April and early-May gathering has offered some early insights into the tone expected in the full minutes. These excerpts suggest a continued focus on inflation remaining sticky, staying above the preferred target. While the central bank has taken only measured steps so far, the underlying message indicates a shift in thinking that monetary support may need to be reduced further, perhaps sooner than many had assumed earlier in the year.

Governor Ueda’s upcoming appearance—though lacking a set time—will likely reinforce those sentiments, especially given the steady prints seen in the Consumer Price Index. Inflation not drifting downward suggests that policy settings could tighten again—if not immediately, then in the quarters ahead. We’ve seen consistent concern about the risks of waiting too long to adjust. Markets should not ignore Ueda’s language here. Often, his phrasing gives away more than the bank’s formal statements.

Interest Rate Products and Yield Curve

For short-term traders, particularly in interest rate products and volatility indices linked to JPY-denominated assets, the emphasis should shift to the yield curve’s pricing of potential adjustments rather than just the policy rate itself. There is clear evidence in the bank’s statements that internal disagreements, while measured in tone, are alive. Certain members have become more vocal about inflation persistence and currency weakness supporting upward pricing pressures. That opens the way for shifts in intraday volatility following each new CPI reading or economic forecast.

We must keep an eye on implied volatility in options markets surrounding Japanese government bonds—especially as it’ll likely expand near scheduled communications from monetary authorities. Even if no direct change in rate occurs next meeting, clearer forward guidance could be enough to push swap markets toward widening expectations, which then feed back into cash bond yields and forward contracts. Traders need to pose two questions: what happens if the yen weakens further, and what actions will trigger a sharper domestic tightening response?

These signals matter more now than ever given that the output gap has narrowed, labour markets remain tight, and import costs are being passed along. Most of these conditions would not have generated a shift in policy stance a year ago. But we’re seeing members like Nakagawa raise concern that inflation may become less transitory and more embedded, especially with energy pass-throughs persisting longer.

Therefore, carry trades leveraging JGBs may now be priced too complacently. Our models show market-based inflation expectations moving slightly up. Not alarmingly, but enough to reconsider any short-dated derivative exposure reliant on extended dovishness. Upcoming option expiries should be reviewed with this in mind, particularly where gamma exposure is sensitive to abrupt shifts.

Broadly, there’s a pattern: statements by the monetary board are becoming shorter in patience. While not hawkish per se, they are not neutral either. The term structure of rates in Japan, typically known for its flatness, may soon find positive slope anew if policy reactions escalate. Repricing will be uneven—but for those positioned in swaps, futures, or leveraged bond ETFs, timing the midpoint of sentiment could prove more valuable than sheer direction.

We believe hedging strategies will need swift recalibration over the next few weeks. Watch for changes not just in the headline CPI, but core readings that exclude fresh food and energy. It’s those that increasingly guide policy inputs from the board’s more influential members. A careful reading of their next minutes will be key to understanding when—and not if—the next adjustment occurs.

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