An aide to Japanese Prime Minister Takaichi signaled that the Bank of Japan is likely to raise interest rates in September. The projection adds weight to expectations that Japan's reflationist policy era is giving way to a tightening cycle. No specific target rate was disclosed in the available sources.
A Bank of Japan rate hike tightens the yen carry trade, where investors borrow cheap yen to fund positions in higher-yielding assets like US equities and emerging market bonds. When that trade unwinds, it forces selling across global risk assets. Japanese government bond yields would also rise, pulling capital back into Japan and away from foreign markets.
July 31: Bank of Japan policy meeting. September : Expected rate decision window based on the aide's projection.
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