Bank of Japan policy board member Hajime Takata said on Thursday that Japan is no longer in deflation and that the central bank should move quickly to address still-negative real interest rates and keep raising its policy rate. He also warned that if underlying inflation clearly rises above 2%, the BOJ may have to speed up the pace of tightening. Markets are now broadly expecting the BOJ to raise rates by 25 basis points to 1.25% at next week’s policy meeting, with some traders also betting the bank could hint at another increase in October. Expectations for further tightening have also been reinforced by comments from U.S. Treasury Secretary Bessent, who previously said he was “quite familiar” with the BOJ’s next move. In currency and bond markets, the yen has rebounded from a July low near 164 to around 153.5, a six-month high, while Japan’s 10-year government bond yield has climbed above 3%, the highest level in about three decades.
BlockBeats reported on Sept. 10 that Bank of Japan Policy Board member Hajime Takata said on Thursday that Japan is no longer in deflation, and that the central bank needs to resolve the issue of negative real interest rates as soon as possible and continue raising its policy rate.
He warned that if underlying inflation clearly exceeds 2%, the BOJ may have no choice but to accelerate the pace of rate hikes.
Markets see a 25-basis-point hike next week
Markets are broadly expecting the BOJ to raise rates by 25 basis points to 1.25% at next week’s policy meeting. Some traders are also betting that the central bank could signal another rate hike in October.
Earlier, U.S. Treasury Secretary Bessent said he was “quite familiar” with the BOJ’s next move, adding to expectations for tighter policy in Japan.
Yen rebounds and 10-year JGB yield tops 3%
At the same time, the yen has rebounded from a low near 164 in July to around 153.5, reaching a six-month high.
Stefan Angrick, Moody’s head of economics for Asia-Pacific, said Takata’s hawkish remarks were another sign that the BOJ is moving toward further rate hikes. He also expects the central bank may eventually increase the frequency of hikes to once every three months.
In the bond market, Japan’s 10-year government bond yield has risen above 3%, the highest level in about 30 years, showing that investors are rapidly repricing assets for a normalization of Japanese monetary policy.
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