Bank of Japan Governor Ueda Says a Rate Increase Is on the Table at Every Meeting, Including September

Kazuo Ueda, the governor of the Bank of Japan, said the central bank will hold a genuine discussion of raising its policy rate at every policy meeting, including the September meeting, The Japan Times reported. He made the comment at a joint press conference following the Group of 20 meeting, as also reported by Bloomberg's Japanese-language service. The bank's next policy meeting runs on 17 and 18 September.

Expectations for a move have also been reinforced by an unusual source of pressure. Scott Bessent, the United States Treasury secretary, has repeatedly suggested that Tokyo needs to act, and Japanese market reporting has described an assumption that the policy rate could rise to around 1.25 percent at the September meeting.

The pressure on Japanese households is already visible in prices they cannot avoid. The Japan Times reported on foreign residents receiving rent increase notices, with some tenants treating higher rent as an unavoidable consequence of inflation and others describing the additional burden as difficult to carry while wages stay flat. Rent is the slowest-moving component of a consumer price index, and once it begins to rise, the inflation driving it is no longer coming mainly from import prices.

From a monetary perspective, Japan is the clearest case of a central bank bearing the cost of a long period of suppressed interest rates. Years of yield curve control and near-zero policy rates produced a currency that weakened whenever the Federal Reserve tightened, and the correction now has to come through either a higher policy rate or continued currency intervention. Intervention addresses the effect. The interest-rate gap between Japan and the United States is the cause.