BOJ May Raise Rates Three Times by December Amid Yen Weakness

Nomura Securities Co. is predicting that the Bank of Japan (BOJ) could raise interest rates three consecutive times by December if yen weakness persists.

The BOJ's Governor Kazuo Ueda has hinted at a possible rate hike at the upcoming meeting, and Hajime Takata, one of the bank's most hawkish board members, has left the door open to an outsized increase as well as back-to-back hikes.

Nomura's Yujiro Goto sees at least one BOJ rate increase per quarter as likely or necessary from now and maintains a dollar-yen target of 154 for now.

Goto believes that investors are looking for signals from Prime Minister Sanae Takaichi on whether she supports further BOJ tightening, which could impact the yen's gains. If Takaichi refrains from weighing in on monetary policy or emphasizes the BOJ's independence, he sees scope for the yen to strengthen beyond 150 per dollar.

Goto also thinks that recent comments from Federal Reserve officials suggest US policymakers may not be rushing to raise rates in September. If the Fed stays on hold while the BOJ delivers a hawkish message, renewed dollar weakness could push dollar-yen below 155 sooner than investors expect.