The Bank of Japan meets on September 17-18, widely expected to raise its policy rate 25 basis points to 1.25%. A weak yen, rising wages, and direct pressure from Washington are pushing the BoJ toward faster action, while a Reuters poll sees the policy rate reaching 1.75% by Q2 2027 — a pace unthinkable during Japan's long era of negative rates.
Japan's central bank meets on September 17-18, and markets are pricing in a 25 basis point increase that would push the policy rate to 1.25%. That step would extend a tightening cycle that began in March 2024 and already lifted the rate to 1%, a level Japan hadn't seen in 31 years.
BOJ eyes a faster path to 1.75%
A Reuters poll projects the policy rate climbing to 1.75% by the second quarter of 2027, a pace of tightening that would have been unthinkable during Japan's long era of negative rates. Former BoJ senior economist Taro Kimura and market reporter Alice French discussed the trajectory during a Bloomberg-hosted webinar this week, with the board's tone shifting from cautious optimism about inflation toward concern about falling behind the curve.
A weak yen and rising wages drive the case
The yen has hovered around 152-153 per dollar, feeding imported inflation through higher fuel and chemical costs as crude oil prices climbed amid Middle East tensions. On the domestic side, real wages in Japan rose 2.4% year-on-year in July 2026, a gain that supports the wage-price dynamics the BoJ has tried to engineer. BoJ board member Kazuyuki Masu has said loose financial conditions could force the bank into more aggressive moves if inflation keeps accelerating, though a 50 basis point hike does not appear to be on the table for now.
Washington adds pressure as the carry trade unwinds
US Treasury Secretary Scott Bessent has urged the BoJ to tighten faster to support the yen, an unusually direct piece of public lobbying. A weak yen makes Japanese exports cheaper and American imports more expensive, cutting against US economic interests. As Japanese rates climb, the economics of the yen carry trade deteriorate, and analysts at XWIN Japan warn that US yields and the yen rising together could speed the unwind of carry trades funded in yen, pushing investors to cut risk across stocks and crypto at once.
The BoJ decision follows the Federal Reserve's own meeting this week, where markets are pricing in roughly an 85% chance of a 25 basis point hike. The US 10-year yield has approached 5%, keeping inflation worries alive heading into both decisions. Currency traders will watch the yen's reaction closely: a hawkish surprise from the BoJ could push it stronger, while any signal that the pace of hikes might slow could send it weaker and reignite concerns about imported inflation.
Sources: Crypto Briefing, CryptoPotato
Trading involves risk.
Risk Disclaimer
