The Bank of Japan is preparing markets for a potential interest rate hike as soon as December, shifting its focus from U.S. economic risks to the inflationary impact of a persistently weak yen. Recent remarks from Governor Kazuo Ueda and several board members have revived hawkish language, emphasizing that currency-driven price pressures now look more lasting.
Political resistance also appears to be easing. A recent meeting between Prime Minister Sanae Takaichi and Ueda signaled no strong government objection to further tightening, while Finance Minister Satsuki Katayama said she had “no particular objection” to the BOJ’s rate-hike path. A Reuters poll shows a slim majority of economists expect a hike at the December 18–19 meeting, with rates seen reaching 0.75% by March.
Market strategists note that the BOJ is deliberately flagging the possibility of a near-term move to avoid surprising investors, even as the final decision may depend on the Federal Reserve’s rate call a week earlier. With the yen near multi-month lows and wage trends improving, the central bank faces growing pressure to accelerate policy normalization.
