The Bank of Japan is likely to raise interest rates at its September 18 policy meeting and could follow up with another hike as soon as January, according to former board member Seiji Adachi. His comments, reported by Bloomberg News, come as traders in Tokyo price in roughly an 80% chance of a move this month, with the yen's weakness and rising import costs keeping pressure on the central bank.
Why Adachi's view matters
Adachi served on the BOJ's policy board until 2021, so his views carry weight among investors trying to read the central bank's next steps. His forecast is notable because it frames the upcoming decision as the start of a sustained hiking cycle, not just a one-off adjustment. That would mark a significant shift for Japan, which has kept interest rates near zero for years to revive its economy.
The logic behind Adachi's call is straightforward: if the BOJ holds rates steady, the yen could weaken further. A weaker currency makes imported goods—fuel, food, and other essentials—more expensive for Japanese households and businesses. That feeds directly into inflation, which the BOJ has been trying to keep under control. Adachi reportedly pointed to comments from US Treasury Secretary as part of the backdrop, suggesting that global factors are also influencing the BOJ's thinking.
What a hiking cycle could mean for markets
If the BOJ does raise rates in September and again in January, the effects would ripple through global markets. Japanese government bond yields would likely rise, and the yen could strengthen against the dollar and other currencies. That would be a reversal from recent trends, where the yen has been under pressure due to the gap between Japan's low rates and higher rates elsewhere.
For Japanese stocks, the impact is mixed. A stronger yen tends to hurt exporters, whose overseas profits are worth less when converted back to yen. That's one reason the Nikkei has been wavering as traders weigh the BOJ's next move. On the other hand, higher rates could benefit banks and insurers, which earn more on lending and investment income.
What it means for everyday investors
For investors outside Japan, the BOJ's path matters because it affects global interest rates and currency markets. A stronger yen could make Japanese assets more attractive to foreign buyers, but it could also reduce the value of dollar-denominated investments held by Japanese investors, potentially leading to shifts in global capital flows.
If you hold international funds or ETFs, a BOJ hike could influence returns through currency movements. For example, a stronger yen would reduce the dollar value of Japanese stocks in your portfolio. Conversely, if you're invested in US Treasuries, a BOJ hike could indirectly affect yields, as treasury yields have been sensitive to global central bank actions.
What to watch next
The BOJ's decision on September 18 will be the key event. Investors will also watch for any signals from the central bank about the pace of future hikes. Adachi's prediction of a January move suggests the BOJ could move quickly, but the actual path will depend on economic data, including inflation figures and wage growth.
In the meantime, currency markets are likely to stay volatile. The yen's movements have been a major driver of regional currency trends, and a BOJ hike could shift the balance further. For now, the market is betting on a September move, but as always, the BOJ could surprise.
The bottom line
Adachi's comments add to the growing expectation that Japan is entering a new phase of monetary policy. For investors, that means paying attention to the yen, Japanese bonds, and global interest rates. While no one can predict the BOJ's exact moves, the direction is becoming clearer: rates are likely to go up, and that will have consequences far beyond Japan's borders.
