BOJ Rate Hike Expected in September Amid Broadening Consensus on Need for Higher Rates

The Bank of Japan (BOJ) is likely to raise interest rates in September, according to Takuji Aida, an economic adviser to Prime Minister Sanae Takaichi. Aida, a reflationist who has been vocal about opposing BOJ rate hikes, had previously forecasted the next increase for January 2027 but now believes it will happen sooner.

Aida's comments suggest that there is broadening consensus within the dovish premier Takaichi's administration on the need for further BOJ rate hikes to combat unwelcome yen falls. The remarks come as markets have nearly fully priced in a 25 basis point rate hike to 1.25% at the next policy meeting.

BOJ Governor Kazuo Ueda has stated that the central bank will debate raising rates, including in September, with a focus on whether inflationary risks are heightening. Finance Minister Satsuki Katayama has maintained that monetary policy decisions are the responsibility of the BOJ.