BOJ hawk Masuda urges quicker rate rises; markets price in 25bp hike to 1.25%
AI Market Summary
A BOJ policy board member's hawkish push to resolve negative real rates and potentially accelerate hikes strengthens expectations for a 25bp increase next week and possible follow-up tightening. The yen's rebound and a 30-year high in 10-year JGB yields signal rapid repricing of Japan's normalization path, with spillovers to global duration, FX funding conditions, and risk sentiment through higher Japanese rates and a firmer JPY.
Impact level
● High
Affected assets
NCFXUSD2JPY/USDT+0.24%
AI Insight · NCFXUSD2JPY/USDTAI Insight
● Neutral
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Sept. 10 — Kazuyuki Masuda, a member of the Bank of Japan's Monetary Policy Committee, said Thursday that Japan is no longer in deflation and that the central bank should move quickly to deal with negative real interest rates by continuing to lift policy rates, Huoxing Finance reported.
Masuda cautioned that if underlying inflation rises well above 2%, the BOJ could be forced to speed up the pace of tightening.
Markets are currently pricing in a 25-basis-point increase to 1.25% at next week's BOJ meeting. Some traders also expect the central bank to hint at another hike in October. U.S. Treasury Secretary Bessent has said he is "quite familiar" with the BOJ's next move, adding to expectations that a hike is imminent.
The yen has rebounded from around 164 in July to about 153.5, its strongest level in six months. Stefan Angrick, Moody's Asia-Pacific head of economics, said Masuda's comments reinforce the BOJ's tightening trajectory and argued the central bank may ultimately shift toward adjusting rates every three months.
In the bond market, Japan's 10-year government bond yield has climbed above 3%, the highest in roughly 30 years, underscoring a rapid repricing as investors reassess the impact of Japan's monetary policy normalization on asset valuations.
