Bank of Japan weighs earlier rate hike as yen weakens

The Bank of Japan has an increasingly strong case to consider an early rate hike as business activity remains robust and the tumbling yen threatens to spur inflation above its price target. Until recently, economists generally saw the central bank hiking rates about every six months, which would put the next move in December.

Markets are now pricing in a solid chance—over 60 percent—that another increase could come by October.

Currency pressure and government signals A key factor weighing on the currency is recent signaling from Prime Minister Sanae Takaichi indicating her preference for prolonged monetary easing. Speculation over the administration’s resistance to hikes has helped push the yen to its weakest level against the dollar since 1986.

With bets rising on Federal Reserve tightening, some traders have discussed the possibility of the currency weakening toward ¥200 per dollar.