BOJ Hikes Rates Again as US and Japan Press Ueda

Bank of Japan Governor Kazuo Ueda raised interest rates on Friday, marking the central bank’s second hike in three months. Ueda discussed the decision during a news conference at BOJ headquarters in Tokyo on Sept. 18.

The decision aligned with the monetary tightening urged by Scott Bessent, the US Treasury chief. Bessent stepped in to bolster the yen and has wanted the BOJ to accelerate its rate increases. Two BOJ appointees voted against the hike, making them the only dissenters in the policy committee.

Japan’s premier Sanae Takaichi, however, is focused on faster economic growth rather than tighter monetary policy. The two appointees who opposed the rate hike were selected by Takaichi. Their dissent signals a potential shift in the board’s composition. Next year, Takaichi can replace the two current board members who hold the most hawkish stances.

The two cases cannot both be true: a policy path that satisfies Washington’s currency objectives requires the very tightening that Tokyo’s leadership prioritizes away from in favor of growth. Ueda’s board dynamics will hinge on how these divergent political pressures resolve.