The Governor of the Bank of Japan, Kazuo Ueda, has sent a clear signal: a rate hike is possible in December.

[Bank of Japan Governor Kazuo Ueda sends a clear signal: Rate hike possible in December] Bank of Japan Governor Kazuo Ueda has given the clearest hint yet that the policy committee may raise the Benchmark Interest Rate this month. He emphasized that any rate hike would only be an adjustment of the degree of accommodative policy, and the authorities will make an appropriate decision on whether to advance policy changes. Ueda Shuuichi stated during a speech to local business leaders in Nagoya, Central Japan, that the Central Bank will “weigh the pros and cons of raising policy interest rates by examining domestic and international economic conditions, inflation, and financial market situations, and make decisions in a timely manner.” According to overnight index swap data, traders expect the probability of the Central Bank raising interest rates at the next policy meeting on December 19 to be around 64%. The probability of taking action before January next year rises to 90%. Before Ueda's statement, members of the policy committee had already continuously released signals supporting interest rate hikes—aside from the two dissenting members calling for a rate increase in the last two meetings, Junko Koeda clearly stated that interest rate normalization should be advanced (without specifying a time), and Kazuyuki Masu mentioned in an interview with the Nikkei that the timing for a rate hike is approaching. Even dovish member Asahi Noguchi pointed out last week that the risk of late policy adjustment is rising. After Ueda's speech, the yen strengthened slightly against the US dollar. Before his speech, as expectations for a rate hike by the Bank of Japan rose, the yield on two-year Japanese government bonds had risen to its highest level since 2008.