Markets overwhelmingly expect the Bank of Japan to raise rates by 25bps this
week; that would be the quickest increase in the current tightening cycle and is
Largely priced in. Markets had already factored in a Fed decision that could
mark the first policy tightening in more than three years. A surge in energy
prices, yen volatility, rising bond yields and implicit US policy pressure have
traders scrutinizing BoJ tone and guidance for signs of accelerated tightening
versus a gradual approach. Traders view BoJ officials’ remarks and comments from
Bessent as effectively locking in a September outcome, and some see a
non-negligible chance of a larger-than-usual hike. Insiders say Japan’s
underlying inflation is close to 2%, increasing policymakers’ urgency to rein in
price pressures compared with baseline trends.
