BOJ and Fed Set for Possible Same-Week Rate Hikes: Yen in Focus

Market participants are preparing for an unusual period of coordinated monetary tightening, as both the Federal Reserve and the Bank of Japan (BOJ) are expected to raise rates within two days of one another.

The Fed will announce its decision on Wednesday afternoon, with futures pricing indicating a greater than 80% probability of a quarter-point hike. The BOJ is then scheduled to follow suit two days later, on Friday.

Hike Expectations Rise Across the Pacific

According to a CNBC survey of 18 economists carried out from Sept. 9 to 14, 89% anticipate the BOJ will increase its benchmark rate by 25 basis points, bringing it to 1.25% — the highest level in 30 years. Those surveyed pointed to quickening inflation, climbing wages, and pressure emanating from Washington as drivers.

“The Trump administration has effectively checked any potential move by a Takaichi administration to block the Bank of Japan from raising interest rates.”

Takahide Kiuchi, executive economist at Nomura Research Institute, made the remarks to CNBC.

Not all economists see eye to eye on the size of the move. Jesper Koll, expert director at Monex Group, predicts a single hike of 50 basis points instead. By contrast, Carlos Casanova, senior economist for Asia at Union Bancaire Privée (UBP), forecasts the BOJ will leave rates untouched, contending the incoming data does not yet justify a quicker pace of tightening.

Roughly 61% of those polled see the yen trading between 155 and 160 against the dollar over the coming month.

Fed Wages Battle for a Hike

The odds for a Fed move have shifted just as dramatically—from a toss-up in late August to a strong 92% favorite for a hike at present. That repricing has run parallel to the yen’s monthly advance versus the greenback.

The currency pair’s movement would further feed into a larger trend flagged by BeInCrypto’s macro risk analysis, where the Fed, the European Central Bank, and the BOJ might all tighten in the same period for the first time since 2006.

Attention now turns to the Fed’s dot plot and any dissenting votes among BOJ policymakers for signals on how swiftly the rate paths of the two economies will converge.

A dual hike would narrow the policy gap between Tokyo and Washington for the first time in years, with potential consequences for carry trades and risk sentiment heading into the fourth quarter.