Attention surrounding expectations for a September rate hike by the Bank of Japan is shifting to a speech by Deputy Governor Himino (氷見野). The possibility of a rate hike around the 17–18 September meeting and the conduct of monetary policy as the Bank moves toward the vicinity of the neutral rate are the main issues.
Expectations are growing that the Bank of Japan will raise its policy rate to 1.25% at its September monetary policy meeting. Among the views expressed by Policy Board members who decided to hold rates steady at the previous meeting in July, an increasing number have suggested that the Bank could accelerate the pace of rate hikes in light of upside risks to inflation.
Bank of Japan Governor Ueda Kazuo (植田 和男) said the Board would continue discussions at upcoming meetings while paying close attention to upside risks to inflation, and did not rule out a rate hike at the September meeting. A decision is expected either at the September monetary policy meeting or after the release of the October Outlook for Economic Activity and Prices.
If a rate hike is implemented, the policy rate would exceed the lower bound of the neutral rate and move closer to the neutral range, which could be regarded as grounds for a hike from the perspectives of curbing yen depreciation and the inflation outlook. However, the Bank of Japan is not expected to cite yen depreciation directly as a reason, but rather to explain the move as a response to future upside risks to inflation. Deputy Governor Himino (氷見野)'s speech will be the focus for gauging a September rate hike.