Key facts
- An economic adviser to Prime Minister Sanae Takaichi projected the Bank of Japan will likely raise interest rates in September.
- The adviser, Takuji Aida, suggested a pace of quarterly hikes until January next year.
- Markets have priced in a 25 basis point hike at the BOJ's upcoming policy meeting.
- BOJ Governor Kazuo Ueda signaled a strong possibility of a September rate hike due to inflationary risks.
TOKYO, Sept 7 (Reuters) - The Bank of Japan is likely to raise interest rates in September and continue quarterly hikes until January next year, according to Takuji Aida, an economic adviser to Prime Minister Sanae Takaichi. Aida, known for his opposition to rate hikes, is now forecasting an accelerated pace, seeing a narrow window for an increase before an early October parliamentary session.
Following the September hike, Aida anticipates another increase by January, after which the BOJ would revert to hikes approximately every six months. He cautioned that such a premature, accelerated pace could negatively impact the economy.
These remarks suggest a growing consensus within Prime Minister Takaichi's administration regarding the necessity of further BOJ rate increases to help curb the yen's depreciation. Markets have largely priced in a 25 basis point hike to 1.25% at the BOJ's upcoming policy meeting on September 17-18.
Prospects for a September rate hike were bolstered by U.S. Treasury Secretary Scott Bessent's recent calls for decisive monetary action to combat yen weakness. BOJ Governor Kazuo Ueda also signaled a strong possibility of a September hike, emphasizing the need to assess escalating inflationary risks.