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The story
Reports that the Bank of Japan is exploring an additional rate hike in September or October split opinion on a 5ch thread over the appropriate interest rate level and its side effects. Some called for rates as high as Turkey’s, while the discussion also spread to the impact on people with variable-rate mortgages, Governor Ueda’s remaining term, and the funding problem facing the Takaichi administration.
The Bank of Japan is considering accelerating the pace of its rate hikes. It has raised the policy rate roughly once every six months, but is now exploring an additional hike in September or October without much gap since the previous hike in June. If the BOJ falls behind on tackling inflation, pressure for renewed yen depreciation and rising rates could intensify again, so markets are closely watching a string of remarks from BOJ officials starting this week.
Raising rates faster than “once every six months”
“If we don’t accelerate the pace of rate hikes, prices will overshoot and it will be a major drag on the economy,” “Shortening the six-month interval…” (continues in the paid version, 1,731 characters remaining)
Source: nikkei.com / Original article here
What people said
You don't even need to go as high as Turkey — just hiking to 3-4% would trigger a yen-carry-trade unwind, send the yen sharply higher, and wreck the global economy.
Not a "developing" country — a "declining" one. There's nowhere left to go but down.
they need to bring in progressive taxation on interest income —
otherwise we'll get a massive surge of rich people living off interest income without ever working.
Hurry up and introduce progressive interest taxation.
The people earning that interest either worked hard or saved hard — it's one of the two, lol.
Why is it a problem if there's a gap?
and send everyone with a variable-rate mortgage straight to hell.
Then let's revise the Land and House Lease Law too, and jack up rent freely as well, lol
That's pretty short-sighted, lol
The Strait of Hormuz and the Red Sea look shaky,
plus a big fight with China —
here comes the "Takaichi risk."
They need to cut ties with China ASAP
or we'll just get dragged into it.
There's less than a month of grace period left,
and yet everyone's still acting so laid-back about it.
Ordinary people rent — these days the only ones taking out mortgages
are geezers in their late 50s.
Anyone younger than the Ice Age generation isn't taking out mortgages,
because they have no income.
The only people a rate hike actually hurts are worthless NEET investors watching their stocks drop and geezers in their late 50s.
No idea where you're getting your sample from, but that's pretty unusual.
Even I — smack in the middle of the Ice Age generation, class of '99 — was able to freely take out a mortgage, variable or fixed, over ten years ago.
He probably just wants to run out the clock and dump this on his successor.
Ueda won't be able to run from it. Next year things are going to get rough worldwide.
Well, I think they'll probably have to cut rates again soon anyway, but for now, the global average inflation rate is apparently around 3%, so they need to get rates to at least 3%.
the Treasury yield sits at 4.25%.
For the BOJ to aim for 4.25%,
Japan's nominal growth would need to climb into the 6% range too.
At that level of nominal growth, the yen would almost certainly be trading in the 180s,
but since US rates move with the US economy, and the exchange rate moves with them,
it ultimately all comes down to US nominal growth.
We can't keep protecting even the wealthy who can afford a home loan at today's super-inflated prices.
And any tiny business that collapses just from the policy rate going back to around 2% wasn't needed anyway.
Once the number of businesses consolidates to a certain scale, the labor shortage eases too.
Manufacturing jobs will shrink?
Can't be bothered looking out for people with that naive a mindset.
Actually, what side effects come from keeping just the policy rate low, given that mortgages are tied to it?
Mainly that it risks accelerating inflation through that channel? And also causing an overall overweighting toward housing investment?
They're keeping rates low precisely because they're fine with inflation running higher, so that's not really a "side effect."
Bessent is half-furious and pressuring the BOJ, so they have no choice but to hike.
The BOJ couldn't care less
about people with variable-rate mortgages.
But if that ends up causing a recession on its own, that's putting the cart before the horse…
During COVID, Japan was the only one already stuck at negative rates, couldn't deploy any economic policy, and ended up the sole loser.
Show everyone at home and abroad that the overly cautious BOJ can actually act.
On the currency front too, if the BOJ shows the guts to take the initiative, the trend could shift away from one-sided yen selling.
Right, this is exactly the moment that kind of move is needed.
The question is whether Ueda, a timid academic, can actually make that call.
The market has already seen through the pattern of dragging out 0.25-point increments over a long time,
so Japan needs to show real resolve.
If they do what Re: #143 says and it triggers a chain of bankruptcies piling up bad, non-performing loans, there's no undoing that.
Understand that's not something you can do from the position of a colony.
And on top of that, the person running the other side is no ordinary man.
Asia especially is in bad shape —
oil costs there run higher than the market rate.
If it's financed with deficit bonds, that'll only accelerate the yen's decline further.
That's why taxing interest income works fine.
It would bring in a staggering amount of tax revenue.
Interest income is unearned income to begin with,
so no matter how much you tax it,
it won't reduce anyone's motivation to work.
There's no such theory.
Background and Key Points
Japan’s benchmark rate spent nearly a decade at zero or below before the Bank of Japan finally exited negative rates in March 2024; since then it has moved in cautious quarter-point steps to around 0.5%, still far below the near-zero-to-4%+ range seen in the US and Europe. That gap is what fuels the yen-carry trade the thread keeps circling back to: investors borrow cheap yen to buy higher-yielding foreign assets, and any sudden BOJ move risks unwinding that trade violently, as happened in August 2024 when a single quarter-point hike briefly crashed global markets. It also matters that roughly seven in ten Japanese mortgage holders use variable rates tied to banks’ short-term prime rate, which moves in lockstep with BOJ policy — unlike in the US, where most mortgages are long-term fixed, a Japanese rate hike hits homeowners’ monthly payments almost immediately.
The thread’s real fault line isn’t hike-or-no-hike — almost everyone assumes a hike is coming — it’s whether the side effects (mortgage defaults, small-business failures, a possible carry-trade unwind) are an acceptable cost of finally taming inflation, versus whether the BOJ is just late to a problem it should have addressed years ago.
What’s likely to trip up outside readers is the Turkey comparison: raising rates doesn’t mechanically strengthen a currency, since Turkey’s lira kept falling for years despite extremely high rates because investors didn’t trust the central bank’s credibility — a dynamic distinct from Japan’s. Also unmentioned is that Japan already taxes interest income at a flat 20.315% “separate taxation” rate, so the poster demanding a new progressive tax is proposing a change to an existing system, not introducing taxation from scratch.
*This article is excerpted and summarized from the 5ch (Breaking News+) thread “[BOJ] Weighs Faster Rate Hikes as Markets Eye 2%: The Heavy Burden of Averting a Yen and Rate Shock.”
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