BOJ Governor Signals Chance of Rate Hike in September Amid Inflation Concerns

The Bank of Japan (BOJ) may raise interest rates in September, according to Governor Kazuo Ueda. He signaled a strong chance of a rate hike this month while emphasizing that the BOJ will assess inflationary risks.

In a news conference following the G20 finance leaders' gathering, Ueda stated that the BOJ would debate raising interest rates with a focus on whether inflationary risks are heightening. This came after a statement from the U.S. Treasury Department, where Secretary Scott Bessent met with Ueda and called for 'decisive' monetary steps to combat the weak yen.

Ueda refrained from pre-committing to a September hike but said that he hoped to discuss with the board this month whether the likelihood of the BOJ's economic scenario materialising was heightening and whether upside price risks were increasing. He added that 'we will scrutinise whether the economy and prices are moving in line with our baseline scenario, as well as risks.'

BOJ hawkish board member Hajime Takata also called for raising rates nimbly in response to inflationary pressures, rather than at a fixed semiannual pace. This led to a rise in the yield on two-year Japanese government bonds (JGB), reaching 1.830% on Wednesday, the highest since 1995.