BOJ Flags Upside Price Risks, Faster Rate Hikes Ahead

The Bank of Japan (BOJ) has signaled potential upside price risks and faster rate hikes in its July meeting summary. One board member noted that, given the approaching 2% underlying CPI inflation, 'greater consideration should be given to upside risks to prices than before.'

This could lead to a faster pace of policy interest rate hikes than market expectations, with one member suggesting larger rate hikes may be necessary to prevent upward inflation deviations. The BOJ has been monitoring the impact of the weak yen on prices and growth, and has signaled it may raise its policy rate in September.

The yen was relatively unchanged against the dollar following the release of the summary, but investors are already pricing in a move before the end of the year. Market players see a two-thirds chance of a rate hike in September and a 96% chance by October.