Takada's Rate Hike Warning Sends Shockwaves Through Markets

Bank of Japan Policy Board member Hajime Takada sent shockwaves through markets on September 2 by suggesting that the magnitude of the next interest rate hike may not necessarily be 0.25 percentage points.

Takada emphasized the need for a 'more flexible approach' to tightening, directly challenging prevailing market expectations.

Just before Takada's remarks, Governor Kazuo Ueda had already hinted at a September rate hike, saying that monetary conditions remain accommodative and that they intend to continue raising interest rates.

The market has priced in a near-100% probability of a September rate hike, according to Bloomberg's overnight index swaps, and the yen is currently approaching the 160 level.