Recent internal discussions at the Bank of Japan (BOJ) suggest a hawkish shift that could see interest rates rise sooner than investors currently anticipate. While market consensus — and most private-sector analysts — point to a July 2026 hike, a Reuters exclusive report indicates that April is now a “distinct possibility.”

This potential acceleration follows the landmark December 2025 decision that pushed rates to a 30-year high of 0.75%. Despite that move, the BOJ faces a complex “inflationary cocktail” that may force it to act earlier than planned.

The primary driver behind this urgency is the sliding yen. Since October 2025, the currency has struggled, inadvertently driving up the cost of imported fuel, food, and raw materials. Policymakers are concerned that companies are increasingly eager to pass these import costs on to consumers, and evidence is mounting that Japan may finally achieve its durable 2% inflation target, supported by wage-induced price rises

Despite the hawkish sentiment among some board members, Governor Kazuo Ueda remains a voice of caution. The Japanese economy remains “fragile,” and the BOJ must navigate significant global headwinds, specifically the U.S. tariff disruptions highlighted in recent World Bank reports.

At the upcoming January 23 policy meeting, the bank is expected to hold rates steady at 0.75% while likely raising its fiscal 2026 growth and core inflation forecasts. For hedge funds and global investors, an April hike would represent a major shift in the “macro mania” of 2026, potentially triggering significant volatility in currency-hedged assets and international carbon markets.

End Notes

Source: https://www.reuters.com/world/asia-pacific/some-boj-see-scope-raise-rates-sooner-than-markets-expect-sources-say-2026-01-16/