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2026-09-18 09:06:09
[Bank of Japan Expected to Raise Rates; Ueda's Press Conference a Key Window for Policy Signals] 1. The Bank of Japan (BOJ) is expected to raise its policy rate from 1% to 1.25% on Friday, reaching its highest level in 31 years. This would be the first rate hike in three months, bringing the rate into the BOJ's estimated neutral range of 1.1% to 2.5%, marking a further step away from Japan's decades-long ultra-low interest rate policy. The policy decision will be announced around 11:00 AM Beijing time, and Governor Kazuo Ueda will hold a press conference at 6:30 AM. 2. The Federal Reserve's rate hike on Wednesday and its potential further tightening of policy this year have put pressure on the BOJ to follow suit. A further widening of the US-Japan interest rate differential could lead to a depreciation of the yen, increased import costs, and exacerbated inflation. Kansai Mirai Bank strategists point out that the pressure on the BOJ has significantly increased, and Ueda's communication challenges at the press conference have also risen accordingly. 3. The market will closely watch Ueda's statements for clues about the timing and pace of future rate hikes. Analysts expect that council member Toichiro Asada, who voted against the rate hike in June, may again raise his objections. Since ending its decade-long easing policy in 2024, the Bank of Japan has raised interest rates approximately twice a year, a pace critics argue is too slow and is one reason for the yen's continued weakness. 4. Even with this rate hike, Japan's policy rate remains lower than that of major global central banks—the European Central Bank raised its key rate to 2.5% last week, and the Federal Reserve recently raised rates to 3.75%-4.00%. US Treasury Secretary Bessenter previously stated that during his meeting with Ueda at the G20 summit, he strongly supported decisive monetary policy measures to address the yen's depreciation. 5. Surveys show analysts expect the Bank of Japan to raise rates to 1.25% this month, to 1.5% by the end of March next year, and then to 1.75% in the second quarter of 2027. Most analysts believe the final rate will reach at least 1.75%.
