BOJ Rate Hike Forecasted for September Amidst Yen Weakness Concerns

Takuji Aida, an economic adviser to Japanese Prime Minister Sanae Takaichi, forecasts that the Bank of Japan will raise interest rates in September. This would be a significant move, as markets have already priced in a 25 basis point increase to 1.25%. Aida's projection suggests that the BOJ will continue to hike rates at a pace of once every quarter until January next year.

Aida is considered a reflationist and has been vocal about his opposition to rate hikes, but he believes that September provides a narrow window of opportunity for a hike before an extraordinary session of parliament convenes in early October. After the September rate hike, Aida expects another increase by January next year, followed by a return to hiking rates every six months.

The remarks from Aida, who is a member of the government's key economic panel, suggest that there is broadening consensus within Takaichi's administration about the need for further BOJ rate hikes. This could help arrest unwelcome yen falls and address inflationary risks. However, some may argue that premature rate hikes would weigh on the economy.