The BOJ decided to raise rates again, an unusually short 3 months after its previous hike. Pressure from U.S. Treasury Secretary Bessent and the cautious stance of the Takaichi administration have combined to fuel expectations of another rate hike this year.
The Bank of Japan raised interest rates again on the 18th. The move attracted market attention as an unusually short 3 months had passed since the previous decision in June, prompting commentary that the pace of rate hikes was accelerating.
The move came as concerns over yen depreciation intensified amid pressure from U.S. Treasury Secretary Bessent for the BOJ to raise rates and coordination between the government and the BOJ. Coordinated Japan-U.S. currency intervention was carried out at the end of July.
In the market, expectations are growing for another rate hike this year, with increasingly strong calls for 2 hikes over the next 6 months. At the same time, market participants are continuing to assess the risk of cooling the economy and the estimated neutral interest rate range of 1.1% to 2.5%.
BOJ Governor Ueda (植田) explained that the rate hike was intended to achieve price stability, while saying that the phase of policy management had changed in light of the degree of monetary accommodation. The 2 reflationist Policy Board members, Asada Toichiro (浅田 統一郎) and Sato Ayano (佐藤 綾野), opposed the decision again.
Inflationary pressures remain persistent, including higher oil prices resulting from the prolonged Middle East situation and growing AI demand. While some observers point to a continued weakening trend in the yen, market reactions to movements in the Japan-U.S. interest-rate differential have often been limited.