SynopsisThe Bank of Japan is set to debate a September rate hike as Governor Kazuo Ueda signals that policymakers will closely assess rising inflation risks, the weak yen and global economic conditions. Markets are increasingly pricing in a rate increase, with Japanese bond yields climbing to multi-decade highs.

comBOJ rate hike bets strengthen as Ueda flags rising inflation risks. The Bank of Japan is set to debate whether to raise interest rates at its September policy meeting, with Governor Kazuo Ueda signalling that policymakers will focus on whether inflationary risks are intensifying, Reuters reported.

Ueda’s remarks, made after attending the G20 finance leaders’ gathering in Asheville, North Carolina, strengthened expectations that the BOJ could raise rates this month. Ueda said the central bank would assess whether economic conditions were developing in line with its projections and whether upside risks to prices were increasing.

The BOJ’s next policy meeting is scheduled for September 17-18, making Ueda’s comments his final public remarks on monetary policy before the central bank enters its customary blackout period. Ueda stopped short of committing to a September rate increase but indicated that policymakers would thoroughly assess the case for further tightening.

The central bank has raised rates five times so far and remains mindful of the cumulative impact of those increases on economic activity. Read more: Global Market: Yen weakness puts BOJ under pressure for faster monetary tighteningInflation risks in focusUnderlying inflation is currently close to the BOJ’s 2% target, increasing the importance of monitoring factors that could push prices higher.

Ueda highlighted several risks, including potential inflationary pressures stemming from the conflict in the Middle East, strong demand linked to artificial intelligence investment and the impact of a weaker yen on import prices. Ueda also said recent economic and price data were broadly tracking the BOJ’s baseline projections outlined in its July outlook report, suggesting that the central bank’s overall policy approach remains unchanged.

Hawkish BOJ board member Hajime Takata also reinforced expectations of further tightening. In a separate speech in northern Japan, Takata argued that the central bank should respond flexibly to inflationary pressures rather than follow a predetermined schedule for rate increases.

830% on Wednesday, its highest level since 1995. S.