The Bank of Japan is strongly alert to the risk of inflation overshooting and could consider an additional rate hike at its next monetary policy meeting, which could be held as early as 17 or 18 September. In addition to higher oil prices, the rapid expansion of AI demand and the yen's depreciation have been cited as factors pushing up prices.
The Bank of Japan is becoming increasingly cautious about rising inflation risks, citing the impact of rapidly expanding AI-related demand and historically weak yen in addition to higher oil prices. It raised its policy rate to 1% in June, and market participants are discussing the possibility that the next meeting could be held as early as 17 or 18 September, with an additional rate hike under consideration.
In the main opinions published by the Bank of Japan in July, several members suggested that the pace of rate hikes could accelerate beyond market expectations. Others called for the need to speed up adjustments to the degree of monetary easing. These multiple views are influencing market expectations regarding the timing and pace of rate hikes.
Signs of import inflation driven by yen depreciation remain deeply entrenched. Although Japanese and US authorities conducted coordinated intervention at the end of July to buy yen, downward pressure on the yen has not abated. The US Treasury secretary has expressed confidence in the Bank of Japan's response, and these developments are supporting expectations of an early rate hike.