Bank of Japan faces pressure to hike interest rates

The Bank of Japan faces increasing pressure to raise interest rates to stabilize the yen and combat rising inflation. Takuji Aida, an economic adviser to Japanese Prime Minister Sanae Takaichi, projects a rate hike to 1.25% during the September 17-18 meeting. Aida’s forecast suggests a series of quarterly increases through January 2027, followed by semiannual adjustments.

U.S. Treasury Secretary Scott Bessent has also called for decisive action from the central bank, suggesting that Japan has “probably reached the end of Abenomics,” referring to the era of close coordination between the government and the central bank. Bessent’s comments add international pressure on Bank of Japan Governor Kazuo Ueda to act.

To mitigate the impact of higher rates on consumers, the Japanese parliament is expected to discuss suspending an 8% levy on food items for two years during an extraordinary session in early October.