# Bank of Japan Board Member Says Rate Increases Will Continue Until Inflation Settles at 2 Percent

Swap contracts now imply roughly a 97 percent chance the central bank lifts its benchmark from 1 percent on September 18, after Japanese 10-year yields touched 3 percent.

- Published: 2026-09-10T05:22:04.367Z
- Canonical: https://polylog.news/2026-09-10/bank-of-japan-board-member-says-rate-increases-will-continue
- Publisher: Polylog (Global desk)
- Section: macro
- Sources: [The Japan Times](https://www.japantimes.co.jp/business/2026/09/10/economy/boj-board-member-masu-speech-rate-hike/), [Financial Times](https://www.ft.com/content/8313accc-1de6-48a8-b184-e5e3b20c5b19?syn-25a6b1a6=1)

Bank of Japan policy board member Kazuyuki Masu said the central bank will keep raising its benchmark interest rate to hold the underlying price trend at 2 percent, [in a speech reported by The Japan Times](https://www.japantimes.co.jp/business/2026/09/10/economy/boj-board-member-masu-speech-rate-hike/). Swap contracts show a roughly 97 percent probability that the bank raises borrowing costs from 1 percent when its two-day meeting ends on September 18.

The Financial Times reported that the hawkish comments [followed pressure from United States Treasury Secretary Scott Bessent and volatility in currency and bond markets](https://www.ft.com/content/8313accc-1de6-48a8-b184-e5e3b20c5b19?syn-25a6b1a6=1). Japanese long-term borrowing costs have already moved: the 10-year government bond yield [touched 3 percent, its highest since 1996, while the yen traded weaker than 160 per dollar](https://www.cnbc.com/2026/09/01/japan-bonds-yen-intervention-bessent.html) and revived talk of intervention in Tokyo.

Japan is the clearest live case of what happens when a central bank tries to exit a decades-long experiment in suppressed interest rates. The Bank of Japan owns a very large share of its own government's debt. Each increase in the policy rate raises the interest bill on a debt stock built on the assumption that money would stay near zero, and it marks down the value of the bonds held by Japanese banks, insurers and the central bank itself.

The currency dimension is unusual. Washington is pressing Tokyo to tighten, which is a way of asking Japan to strengthen the yen without the United States loosening its own policy. That treats the exchange rate as the problem rather than the interest-rate divergence producing it.

## What this means

A Bank of Japan increase on September 18 raises the cost of borrowing yen, which has been one of the cheapest funding currencies in the world. Investors who borrowed in yen to buy higher-yielding assets elsewhere face a higher cost on that position, and unwinding it tends to strengthen the yen and pressure the assets bought with it. Japanese banks and insurers holding long-dated domestic bonds lose on mark-to-market as yields rise, while Japanese savers finally earn a positive real return for the first time in a generation. The scale of the move depends on whether the bank signals more increases to come or presents this one as the last for now.

## What to watch

- The Bank of Japan's own forecast language on September 18, because guidance pointing to further increases would move the yen far more than the single 25 basis point step itself.
- Whether the yen strengthens through 160 per dollar after the decision, which would show the market believes the tightening path rather than fading it.
- Japanese 30-year bond auction demand, the clearest read on whether domestic institutions will absorb long-dated debt at these yields without official support.