BOJ May Consider Additional Rate Hike in Sept.

Tokyo, Aug. 11 (Jiji Press)–The Bank of Japan may consider an additional interest rate increase at its next policy meeting Sept. 17-18, following a hike in June, in response to rising risks of higher inflation, informed sources said. Prices in Japan may rise further reflecting rapidly growing demand related to artificial intelligence and the yen’s sharp depreciation as well as higher crude oil prices. Many financial market participants had expected the BOJ to raise interest rates once about every six months. At the BOJ’s latest policy-setting meeting July 30-31, however, some members of its Policy Board said interest rate hikes should be accelerated, according to a summary of opinions at the meeting released Monday. One member was quoted as saying, “It could be considered that the pace of policy interest rate hikes will be faster than market expectations,” while another said it is necessary for the BOJ “to accelerate the pace of adjustment to the degree of monetary accommodation.” At its policy meeting in June, the BOJ raised its target for the unsecured overnight call rate, the nation’s benchmark short-term interbank rate, by 25 basis points to around 1 pct. On the foreign exchange market, the yen remains under strong downward pressure although Japanese and U.S. authorities conducted their first coordinated yen-buying market intervention in roughly 28 years on July 31. In an interview with U.S. broadcaster CNBC on Aug. 4, U.S. Treasury Secretary Scott Bessent said he believes BOJ Governor Kazuo Ueda “will do what is needed,” amid concerns that a weaker yen and declining Japanese government bond prices could trigger a sell-off in U.S. Treasury bonds. The remark also reinforced market expectations for an early interest rate hike by Japan’s central bank. At a press conference after the July meeting, Ueda said that Policy Board members “will thoroughly discuss whether to raise interest rates further at the next and subsequent policy meetings,” leaving open the possibility of implementing a rate hike in September. END [Copyright The Jiji Press, Ltd.]