Ishiba’s exit puts Bank of Japan under pressure to delay rate hikes

Prime Minister Shigeru Ishiba’s resignation has injected fresh uncertainty into Japan’s political and economic landscape, raising questions over the timing of the Bank of Japan’s next interest rate hike.

Analysts say the BOJ is unlikely to move in October as planned, with Ishiba’s departure pushing down the yen and Japanese bond yields. The ruling Liberal Democratic Party will choose a new leader on October 4, creating a political vacuum just weeks before the BOJ’s Oct. 29–30 policy meeting, News.Az reports, citing Reuters.

Sanae Takaichi, a frontrunner to succeed Ishiba, is known for supporting fiscal stimulus and low interest rates. Her potential rise has tempered market expectations of an imminent hike, with money markets now pricing just a 20% chance of a move by October, down from 46% last week.

While inflation remains above the BOJ’s 2% target and wage pressures are growing, officials are wary of hiking during political turbulence. “The BOJ doesn’t need to hike in the midst of turbulence. It is in no rush,” one source familiar with BOJ thinking said.

Longer-term, however, rising inflation and concerns over fiscal discipline could force the central bank to press ahead with tightening, despite political headwinds.

News.Az