BOJ Rate Hike Odds Soar to 94% as Ueda Pledges Continued Tightening

Bank of Japan Governor Ueda Kazuo has reaffirmed his intention to continue tightening monetary policy, despite market expectations for a rate hike in September already surpassing 90%. The BOJ's next monetary policy meeting is scheduled for September 17-18, where the possibility of another rate hike will be discussed. According to think tank Totan Research, financial markets are pricing in a 94% probability of a BOJ rate hike in September.

Ueda's comments on Tuesday came after the G20 finance ministers and central bank governors meeting, where he met with US Treasury Secretary Scott Bessent. Bessent expressed support for Japan's 'decisive action' on rate hikes, pushing for an increase in interest rates. Ueda declined to give a direct answer on whether rates would rise in September, saying the BOJ would 'properly discuss at every meeting, including the next monetary policy meeting.'

The BOJ has gradually raised its policy rate since scrapping its negative interest rate policy in March 2024, with five hikes so far. The implied probability of a rate hike stood at 67% on August 10, climbed to 87% on August 26, and has since soared to 94%. Ueda also mentioned that the cumulative effects of roughly five rate hikes were beginning to show, and he would 'discuss and make a judgment with committee members at the next monetary policy meeting.'

On Japan's 10-year government bond yield reaching 3%, Ueda said it was driven by 'inflationary pressures stemming from the Middle East, AI-related fundraising, and the rise in global interest rates.'