BOJ Weighs Rate Hike in September Amid Inflation Risks
The Bank of Japan (BOJ) may raise interest rates in September, according to its governor Kazuo Ueda. In remarks made on Tuesday at a news conference in Asheville, North Carolina, Ueda said that the BOJ will debate raising rates this month, with a focus on whether inflationary risks are heightening.
Ueda's comments came after a meeting with US Treasury Secretary Scott Bessent, who called for 'decisive' monetary steps to combat the weak yen. The BOJ has raised interest rates five times so far and is now considering further hikes, but Ueda emphasized the need to carefully assess the cumulative impact on the economy.
The hawkish comments from Ueda helped lift the yield on the two-year Japanese government bonds (2-year JGB) to 1.830%, the highest since 1995. BOJ board member Hajime Takata also made hawkish remarks, suggesting that the BOJ should raise rates in response to inflationary pressures rather than at a fixed semiannual pace.
The BOJ's next policy meeting is scheduled for September 17-18, and Ueda confirmed that the central bank will scrutinize whether the economy and prices are moving in line with its projections. The BOJ has been paying particular attention to inflationary risks, including upside price risks from the Middle East conflict, robust AI-related demand, and the boost to inflation from a weak yen.
Ueda declined to comment on markets fully pricing in the chance of a rate hike this month, but noted that the BOJ will stay vigilant to market developments. The BOJ raised interest rates to 1% in June and kept them steady in July, signaling a strong chance of a near-term hike.