BOJ Flags Inflation Risks, May Hike Rates Faster Than Expected

The Bank of Japan has flagged rising risks of inflation in its latest meeting summary. One board member noted that the underlying CPI inflation rate is approaching 2% and that more consideration should be given to upside price risks than before.

This could lead to a faster pace of interest rate hikes than market expectations, with one member suggesting that the BOJ needs to demonstrate its determination to prevent upward inflation deviations. This could potentially involve larger rate hikes, as central bankers around the world begin to raise rates.

The summary also mentioned that the BOJ is closely watching the impact of the weak yen on prices and growth, and that it may consider raising rates in September. The market has already priced in a two-thirds chance of a move in September and 96% chance by October.