BOJ Member Calls for Quick Rate Hike as Market Bets on 25 Basis Points Next Week

On September 10, BOJ Monetary Policy Committee member Kazuo Ueda stated that Japan is no longer in a deflationary state, and the central bank must quickly address the issue of negative real interest rates by further raising policy rates. He warned that if the potential inflation rate significantly exceeds 2%, the BOJ may have to accelerate the pace of rate hikes. The market widely expects the BOJ to raise rates by 25 basis points to 1.25% at next week's policy meeting. Some traders are betting that the central bank may hike rates again in October. U.S. Treasury Secretary Janet Yellen expressed that she has a "fairly good understanding" of the BOJ's next steps, further reinforcing market expectations for a rate hike in Japan. The yen has rebounded from a low of nearly 164 in July to around 153.5, reaching a six-month high. Stefan Angrick, Moody's Asia-Pacific Chief Economist, believes Ueda's hawkish remarks signal another step towards rate hikes by the BOJ and predicts that the central bank may increase the frequency of rate hikes to once every three months. In the bond market, Japan's 10-year government bond yield has surpassed 3%, reaching a nearly 30-year high, indicating that the market is rapidly reassessing the asset pricing impact of normalizing Japan's monetary policy.