Is a rate hike in December likely in Japan? Bank of Japan Governor Kazuo Ueda hints at taking action.

The Governor of the Bank of Japan, Kazuo Ueda, has issued the clearest hint yet that the Central Bank's board may raise the Benchmark Interest Rate this month. He pointed out that any rate increase would only be an adjustment to the degree of easing, and the authorities will decide whether to take action based on actual circumstances.

The Central Bank Governor Kazuo Ueda hinted that Japan is likely to raise interest rates in December.

According to a report by Bloomberg, Bank of Japan Governor Kazuo Ueda stated during a speech to local business leaders in Nagoya on Monday that the Bank of Japan “will weigh the pros and cons of raising policy interest rates by examining domestic and foreign economies, inflation, and financial markets, and will make decisions accordingly.”

According to the overnight swap index, traders believe that the possibility of the Central Bank raising interest rates at the policy meeting ending on December 19 is about 64%. If rates are raised at the latest in January, this percentage will rise to 90%. In contrast, two weeks ago, the market's expectation for a rate hike in December was only 30%.

The Japanese yen rises, and the two-year government bond yield reaches a new high since 2008.

After Ueda delivered his speech, the two-year government bond yield, which is more sensitive to expectations of monetary policy, rose to 1.01%, the highest level since 2008. The five-year and ten-year government bond yields both increased by about 4 basis points, to 1.35% and 1.845% respectively. The USD/JPY exchange rate fell by 0.4% ( as the yen strengthened ), to 155.49.

Despite the fact that the Bank of Japan has repeatedly stated that it has not set any exchange rate targets, it is also aware that the depreciation of the yen will increase import costs and further push up inflation. Given the rising dissatisfaction among voters regarding the cost of living, this is precisely what most observers of the Bank of Japan expect. Even though Prime Minister Kishida supports a loose monetary policy, it is a key reason why the Bank of Japan is ultimately expected to raise interest rates in December or January.

Is Japan's interest rate hike expected in December? Bank of Japan Governor Kazuo Ueda hints at taking action, first appeared in Chain News ABMedia.