BoJ Set to Hike Rates Amid Weakening Yen

The Bank of Japan (BoJ) is likely to raise its benchmark interest rate next month, according to Seiji Adachi, a former BoJ board member. The move would validate widespread market speculation and could be followed by another increase as early as January.

As of Monday afternoon in Tokyo, traders assigned a roughly 80% probability of a rate hike when the BoJ delivers its next policy decision on September 18. The yen has remained weak despite US-Japan coordinated intervention, and a decision to hold settings steady could lead to a sell-off of the currency.

Adachi said that if the BoJ doesn't hike, the yen could weaken sharply again, raising the risk of faster inflation due to costly imports. He noted that markets have almost fully priced in a hike, making it difficult for the BoJ to hold rates steady.