Takaichi adviser shifts forecast, now expects BOJ rate hike this month

Markets have all but locked in a Bank of Japan rate increase at the central bank's September 17–18 policy meeting, with prediction markets assigning a 97% probability to a 25-basis-point hike that would lift the policy rate from 1% to 1.25%. The near-unanimous expectation marks a sharp shift from just weeks ago and reflects converging signals from BOJ officials, the Japanese government, and foreign policymakers.kalshi

Takaichi Adviser Breaks With Dovish Camp

In a research note published Monday, Takuji Aida — an economic adviser to Prime Minister Sanae Takaichi and chief Japan economist at Credit Agricole Crédit Agricole S.A. — projected a rate hike in September, moving forward his previous forecast of January 2027. Aida, a reflationist long seen as among the most vocal opponents of BOJ tightening, said September offered a narrow window before an extraordinary parliamentary session convenes in early October to debate Takaichi's plan to suspend an 8% food levy for two years.finance.yahoo

Aida forecast the BOJ would follow up with another increase by January and then revert to a pace of roughly one hike every six months. "The premature, accelerated pace of rate hikes would weigh on the economy," he cautioned. His remarks, as a member of the government's key economic panel, suggest a broadening consensus even within the dovish Takaichi administration that further tightening is needed to arrest unwelcome yen weakness.finance.yahoo

Yen Surge Exposes Market Fragility

The yen jumped more than 2% against the dollar over two sessions last week, briefly touching 155.28 per dollar — its strongest level in a month — after BOJ board member Hajime Takata said the central bank should hike rates "nimbly" rather than follow a fixed schedule. Governor Kazuo Ueda reinforced the message, saying the BOJ would now discuss interest rates at every meeting.indrastra+2

The speed of the move rattled traders. Analysts noted the rally exposed how sensitive positioning had become around the yen carry trade, in which investors borrow cheaply in Japan and deploy funds into higher-yielding assets abroad. BOJ account data confirmed no official intervention had occurred, meaning the move was driven entirely by shifting rate expectations.reuters+1

Pressure From Multiple Directions

External pressure has reinforced the domestic case for tightening. U.S. Treasury Secretary Scott Bessent last week called for "decisive" BOJ monetary steps to combat yen weakness. Meanwhile, Japan's inflation has remained above the BOJ's 2% target, wages have been rising, and the 10-year Japanese government bond yield has climbed near 3% — its highest in decades. The convergence of those forces leaves the September meeting as what one analyst called the start of "a new phase" for Japanese monetary policy.tradingview+2