Bank of Japan hawkish member Hajime Takata: Consecutive rate hikes cannot be ruled out; yen rebounds to the 159 range

According to Golden Ten Data APP, Kazuo Takata, one of the Bank of Japan's most hawkish committee members, stated that a significant rate hike and consecutive increases are not ruled out, remarks that prompted the yen to rise. The yen rose 0.5% against the US dollar, reaching 159.44 yen per dollar, after previously dropping to 160.39.

Kazuo Takata said a 0.25% rate hike is "not set in stone." He also added that, overall, consecutive rate hikes are possible. Aozora Bank's Chief Market Strategist Eiichiro Morioka commented: "The market responded to Takata's clearer wording, as he explicitly mentioned the possibility of consecutive rate hikes. His comments were more explicit than previous statements from the Bank of Japan's governor and vice governor, especially regarding the magnitude and pace of raises."

High international oil prices and the substantial US-Japan interest rate differential continue to pressure the yen. Despite Japanese authorities having spent a record-breaking $96.4 billion intervening in the currency market over the past month, investors remain highly vigilant about potential further actions to support the yen. The yen has given back most of its gains following July's historic joint US-Japan intervention.

Bank of Japan Governor Kazuo Ueda stated after the G20 meeting that he will consider risks of rising prices when deciding monetary policy, which has reinforced market expectations for a rate hike at the policy meeting later this month. Overnight index swap market data show the probability of a September rate hike is now approaching 100%.

At the time of Ueda's remarks, US Treasury Secretary Janet Yellen urged the Bank of Japan to take appropriate policy actions, fueling speculation of rate hikes in the market. However, Japanese Finance Minister Katayama Kazuki downplayed these views.

According to the US Treasury Department's meeting minutes released Tuesday, Janet Yellen "strongly supported Japan taking decisive market and monetary policy measures to address the issue of the yen's exchange rate being significantly undervalued, and pointed out that the weak yen is exacerbating domestic inflation pressures in Japan."