Ryozo Himino kept the door open to an interest rate increase next month, offering no clear pushback against growing market expectations for a move. In-depth deliberations should be held at each monetary policy meeting with these perspectives in mind.” Overnight index swaps implied a roughly 85% probability of a September hike as of Thursday morning before the speech, giving little need for the bank to strengthen the odds of a September move. The BOJ is confronting mounting inflationary pressures as the Middle East conflict drags on, compounded by persistent yen weakness in an economy that imports almost all of its oil and more than half of its food.
The yen weakened a touch following Himino’s remarks, trading at around ¥159.30 per dollar. That likely reflects the existing expectations for a September move and the lack of a clearer hint from the deputy governor. Himino’s remarks on the need of thorough discussions at every meeting contrasts with signaling he gave ahead of a rate hike in January 2025, when he said the bank would debate the need for a rate hike the following week.
The currency remains near the ¥160 per dollar level despite last month’s first coordinated intervention by Japan and the U.S. since 1998. Treasury Secretary Scott Bessent has said policy needs to follow up on the currency action to change the direction of the market, comments that have helped fan expectations for an early BOJ move. Former BOJ Board Member Seiji Adachi said in an interview this week that the central bank is “boxed in” and a September rate increase is highly likely.
Investors will have more opportunities to assess momentum toward a hike ahead of the two-day policy meeting. Kazuo Ueda is likely to speak at a news conference following next week’s Group of 20 gathering, followed by speeches from board members Hajime Takata and Kazuyuki Masu. A September increase would mark the shortest interval between rate hikes under Ueda after five moves, signaling a shift away from the roughly six-month pace that has characterized the normalization cycle so far.
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