BOJ Rate Hike Forecast Sparks Market Expectations

According to Takuji Aida, an economic adviser to Prime Minister Sanae Takaichi, the Bank of Japan (BOJ) is expected to raise interest rates in September 2026 and continue with quarterly hikes until January next year.

Aida, who is also the chief Japan economist at Credit Agricole, moved forward his forecast for the next increase from January 2027 due to a narrow window for a hike before an extraordinary parliamentary session convenes in early October.

Markets have almost fully priced in a 25 basis point rate increase to 1.25% at the BOJ's next policy meeting on September 17-18, following U.S. Treasury Secretary Scott Bessent's continued calls for higher BOJ rates last week.

Aida warned that an accelerated pace of rate hikes could weigh on the economy, while his comments suggest a broadening consensus within the dovish premier's administration for further BOJ rate hikes to stem unwelcome yen declines.