BOJ’s Ueda Balances Global Risks and Domestic Pressure Over Potential Rate Hike

Bank of Japan (BOJ) Governor Kazuo Ueda left Washington last week uncertain whether global economic headwinds would permit an imminent interest rate hike. Global finance officials at the G20 meetings cautioned against tightening policy too soon amid renewed U.S.-China trade tensions and persistent downside risks. However, the International Monetary Fund’s (IMF) upgraded 2025 global growth outlook — highlighting economic resilience — gives Ueda room to consider an earlier move if the hawkish BOJ board pushes for action before year-end.

During his Washington press conference, Ueda maintained a cautious tone, emphasizing that he would continue monitoring global trends and economic data before the BOJ’s next policy meeting on October 29–30. Market analysts expect the next rate increase could come by January 2025. Ueda has consistently warned against raising borrowing costs prematurely, citing the need to assess the strength of the U.S. economy and potential fallout from U.S. tariffs on Japan’s export sector.

Still, pressure is mounting within the BOJ to act. With inflation surpassing the 2% target for three consecutive years and Japan’s economy showing resilience, several board members are urging faster normalization. Two members even proposed a hike in September, and another dovish policymaker later acknowledged that a rate rise was becoming increasingly necessary.

Analysts warn that delaying too long could further weaken the yen, intensifying import-driven inflation. “If the BOJ skips October, December could be the next window,” said former BOJ executive Tomoyuki Shimoda. Yet, policymakers remain wary — a move to 0.75% would mark Japan’s highest rates in three decades. Political transitions at home, including the expected appointment of pro-easing Prime Minister Sanae Takaichi, may also prompt the BOJ to proceed gradually.

Ueda’s challenge remains balancing inflation control, currency stability, and global uncertainty — all while steering Japan through its most pivotal monetary crossroads in decades.