Calls for the Bank of Japan to accelerate the pace of rate hikes are growing within the central bank, driving up market expectations for an additional hike in September. Hawkish views have emerged in the Summary of Opinions, while factors pushing up prices and political implications have become key issues.
The Bank of Japan disclosed that several policymakers at its July Monetary Policy Meeting argued that the pace of rate hikes should be accelerated. At least 3 Policy Board members said the bank should assume a faster pace than markets expect, while another view held that the risks of waiting were not negligible. As a result, market expectations have strengthened that an additional rate hike could be implemented as early as September.
Long-term interest rates have continued to trend higher, with the yield on 10-year Japanese government bonds rising to 2.805%. Core CPI in Tokyo's 23 wards accelerated for the second consecutive month to 1.9%, pointing to continued inflationary pressure. BOJ Governor Ueda Kazuo (植田和男) suggested that the bank could accelerate the pace of rate hikes if it maintains its 1% policy rate while accommodative financial conditions persist.
Tensions are also emerging between the BOJ and the government. The administration led by Prime Minister Takaichi Sanae (高市早苗) is calling for measures to curb the rise in government bond yields, and friction between fiscal and monetary policy could affect the bond market. Attention will focus on the direction of policy management ahead of speeches next month and the 18–19 September meeting.