BOJ Governor Signals Likely September Rate Hike

Bank of Japan Governor Kazuo Ueda signaled a strong likelihood of another interest rate increase this month, stating the central bank will debate upside price risks at its upcoming policy meeting while noting that economic data have broadly aligned with its projections. His comments, made after a gathering of Group of 20 finance leaders, have reinforced market expectations for a rate hike on September 18.

Speaking to reporters in Asheville, North Carolina, Ueda said the BOJ's board will have a thorough debate on policy when it meets on September 17-18. He emphasized that with underlying inflation quite close to the bank's 2 percent target, the BOJ must pay particular attention to inflationary risks in guiding policy. At the same time, he added, the bank must carefully scrutinize how the cumulative impact of its past rate hikes affects the economy.

Ueda's remarks are widely interpreted as paving the way for a further tightening of monetary policy. Overnight index swaps have implied a near-certain probability of a September hike, and the governor pointedly avoided pushing back against those market expectations. He declined to comment directly on the market's pricing but stated...