US pressure intensifies! Nearly 90% of economists bet the Bank of Japan will raise rates to 1.25% on Friday.

Note that a survey shows that, due to rising inflationary pressure, the Bank of Japan is likely to raise interest rates to 1.25% at the end of its two-day meeting on Friday. If it raises rates, it will mark an acceleration of the tightening cycle, faster than the six-month intervals the bank has followed since it began policy normalization in March 2024. The Bank of Japan's last rate hike was in June. About 89% of respondents said they expect the Bank of Japan to raise rates by 25 basis points, citing rising inflation, higher wages, and pressure from the US government. Affected by the Iran war pushing up energy costs, Japan's headline inflation rate rose to its highest level this year in July, reaching 1.9%. In the same month, real wage growth was 2.4%, the seventh consecutive month of increases. The United States has been publicly advocating that Japan continue its rate-hike cycle, pressuring Prime Minister Sanae Takaichi's preferred loose monetary policy and expansionary fiscal policy. Most recently, Treasury Secretary Bessent asked Bank of Japan Governor Kazuo Ueda to take "decisive market and monetary actions" earlier this month at the G20 finance ministers and central bank governors meeting. The United States supports a stronger yen, because a weak yen could prompt Japan to sell US assets, including US Treasuries, to support its currency. Such a move could further push up US Treasury yields. At the end of July, the two sides conducted a historic joint intervention to boost the yen. Takahide Kiuchi, executive economist at the Nomura Research Institute and a former Bank of Japan Policy Board member, said, "The Trump administration has effectively blocked any move the Takaichi government might make to stop the Bank of Japan from raising rates." "As a result, the Bank of Japan has gained the freedom to go ahead with rate hikes." Bank of Japan board members have also made hawkish remarks, leaving room for accelerating the pace of rate hikes. The survey was conducted from September 9 to 14, with 18 economists and analysts as respondents. Some economists also said the Bank of Japan's actions may surprise the market. Jesper Koll, expert director at Monex Group, said he believes the Bank of Japan will raise rates by 50 basis points in a "one-and-done" manner. Carlos Casanova, senior Asia economist at Union Bancaire Prive, expects the Bank of Japan to hold steady for now, but he believes the bank is already behind the curve and ultimately expects it to raise rates twice every six months by 25 basis points each time. "The data do not yet support a policy pivot," he said, so "there is not enough visibility to support a faster pace of rate hikes. The Iran situation and oil prices remain the main risks." When asked which Bank of Japan board members are most likely to vote against a rate hike, about one-third of respondents mentioned Toichiro Asada and Ayano Sato. Both are seen as reflationists and were appointed by Sanae Takaichi earlier this year. As for the yen, about 61% of respondents said they expect the yen to trade between 155 and 160 over the next month. Homin Lee, senior macro strategist at Lombard Odier, said the Bank of Japan's hawkish shift will help keep the yen stronger than 160. But he said appreciation beyond 150 "will not be easy," because government and business officials will resist "inappropriate" excessively rapid currency appreciation.