BOJ Rate Hike Forecasted for September, Quarterly Increases to Follow

Takuji Aida, an economic adviser to Prime Minister Sanae Takaichi, believes the Bank of Japan (BOJ) will raise interest rates in September. This would be followed by quarterly hikes until January next year, according to Aida's forecast.

September provides a narrow window for a hike before an extraordinary session of parliament convenes in early October, Aida noted. After the rate increase in September, the BOJ is likely to follow up with another hike by January next year. Following that, the central bank will revert to a pace of around once every six months.

Aida's remarks suggest broadening consensus within Takaichi's administration of the need for further BOJ rate hikes to combat unwelcome yen falls. The market has nearly fully priced in the chance of a September rate hike, with expectations of a 25 basis point increase to 1.25 percent at its next policy meeting on September 17 and 18.

The prospects of a September rate hike were heightened by US Treasury Secretary Scott Bessent's continued calls for higher BOJ rates last week. When asked about Bessent's remarks, Finance Minister Satsuki Katayama reiterated that monetary policy decisions are the responsibility of the central bank.