The September rate hike is widely viewed as a foregone conclusion, with attention now shifting to the pace of further rate hikes. The market expects the BOJ to have greater flexibility in managing policy, supported by efforts to correct the yen’s depreciation and progress toward monetary policy normalization.
The BOJ’s September rate hike has already been priced into the market as a foregone conclusion, while the pace at which further rate hikes will actually proceed is expected to be the focus going forward. Investors are watching for future signals from Governor Ueda (植田) at his press conference, making the BOJ’s policy direction a key market focus. The yen OIS market is said to have priced in approximately 3.72 rate hikes by the July 2027 policy meeting, raising expectations of an acceleration.
Against this backdrop, the market is increasingly interpreting remarks by Treasury Secretary Bessent as supporting the BOJ’s policy management. His remarks encouraging a reassessment of the Takaichi administration’s reliance on reflationary policies have led to the view that, in the context of international monetary policy, they could give the BOJ greater flexibility.
From a market perspective, there are limits to the view that the Takaichi administration’s declining influence will make it easier for the BOJ to raise rates. In retrospect, the pace of BOJ rate hikes has, if anything, accelerated since the administration took office, and the yen’s depreciation may have contributed to encouraging further rate hikes.