Bank of Japan Weighs Interest Rate Hike in October as Inflation Pressure Mounts
The Bank of Japan (BOJ) is considering a potential interest rate hike, with markets now predicting a 60% chance of an increase at the October meeting. This follows a pause in rate hikes since January, as the BOJ monitored the impact of U.S. tariffs on Japan's economy.
The BOJ last raised rates in January, but since then, it has been reviewing the effects of U.S. tariffs on Japan's economy. Now, with uncertainty over these tariffs and other external factors subsiding, some board members believe there's room to increase the real interest rate.
Several board members have expressed concern about mounting inflationary pressure, suggesting it might be time to resume rate hikes. Five opinions even indicated that resuming hikes in the near future could be necessary. However, others have called for caution to avoid surprising the market with a sudden increase. Two board members dissented and advocated for a hike to 0.75% at the September meeting, but the BOJ maintained rates at 0.5%.
The BOJ's next meeting on October 29-30 will be closely watched, with markets pricing in a 60% chance of a rate hike. The debate among board members reflects a broadening call for a near-term increase, although some still advocate for vigilance and caution.
