BOJ faces heightened pressure to accelerate rate hikes amid global inflation concerns

During this week’s IMF gatherings in Bangkok, global leaders highlighted inflationary threats stemming from the Iran war and a rapid AI-driven demand shock. Bank of Japan Governor Kazuo Ueda discussed these issues with G7 and G20 peers, hearing US veteran Kevin Warsh describe a shared challenge of preventing inflation spillovers. The BOJ, which lifted rates in September, is likely to keep policy unchanged at its October 29-30 session to evaluate how earlier moves have affected the economy.

Nonetheless, the central bank may issue hawkish cues that keep the door open for a December hike, given the added price pressure from a weak yen and higher import costs. US Treasury Undersecretary Erin Browne urged continued tightening to avoid disorderly yen declines, while the Fed’s upcoming decision could influence the BOJ’s stance. Board member Junko Koeda warned against excessive caution, pointing to upside inflation risks that could prompt a near-term rate rise.