{"text":[[{"start":7.2,"text":"The Bank of Japan and governor Kazuo Ueda are poised to raise interest rates this week to the highest level in 31 years, a decision that must balance domestic economic risks, global market shockwaves and unprecedented pressure from Donald Trump’s administration."}],[{"start":22.52,"text":"While markets are convinced that Ueda will raise interest rates by 0.25 percentage points to 1.25 per cent, the run-up to the BoJ’s monetary policy meeting has been unusually fraught, according to traders, with Ueda’s signalling and the bank’s forward trajectory — a rapid schedule of further increases or a sudden pause — a subject of exceptional uncertainty."}],[{"start":43.48,"text":"At the same time, US Treasury secretary Scott Bessent’s repeated claims of “asymmetric information” about the BoJ’s next moves have put unprecedented strains on Ueda’s independence. While Japan’s Prime Minister Sanae Takaichi favours reflationary policies and lower rates, Washington is willing Japanese rates higher and appears increasingly comfortable interfering in Tokyo’s monetary affairs."}],[{"start":65.2,"text":"“There’s a lot of pressure on Ueda because this is one of those times where big moves in the market have less to do with changes in economic fundamentals and policy and more to do with market sentiment about what those fundamentals mean,” said Richard Katz, an economist and longtime Japan watcher."}],[{"start":81.68,"text":"He added that Ueda, an academic before he became BoJ governor in 2023, had not shone as a communicator."}],[{"start":88.76,"text":"Markets will be scrutinising both the BoJ’s statement and Ueda’s comments for hints of how much the central bank’s decision is based on the need to stabilise inflation versus its perceived duty to maintain upward momentum for the yen."}],[{"start":100.68,"text":"Japanese authorities undertook a $96bn intervention with the co-operation of the US in July and August to support the currency, which had fallen to 40-year lows of almost ¥164 per dollar."}],[{"start":null,"text":"
"}],[{"start":112.2,"text":"Ueda is also facing ructions within his policy board. In July, when the BoJ opted to keep rates on hold, one member, Hajime Takata, voted to raise. In a public appearance this month, Takata hinted that the bank should consider more aggressive measures to keep itself ahead of the curve, such as faster or larger rate increases."}],[{"start":128.28,"text":"The BoJ last raised rates in June to 1 per cent, putting Friday’s expected rate rise well ahead of the bank’s previous steady “normalisation” schedule of every six months."}],[{"start":139.52,"text":"On the other hand, analysts said, Ueda is likely to face significant pressure from Takaichi’s inner circle as the prime minister pushes her agenda of stimulating economic growth."}],[{"start":149.96,"text":"The key figure is Minoru Kiuchi, minister for economic and fiscal policy, who will attend the BoJ’s board meeting, and whose comments, which will appear later in the published minutes, could offer markets a signal about Takaichi’s thinking on monetary policy or express pressure to slow the pace of future increases."}],[{"start":167.92,"text":"“I don’t think market players or Bessent appreciate the dilemmas facing Ueda,” said Katz. He added that while headline inflation of 2.3 per cent remained above the bank’s 2 per cent target, demand-led inflation was still weak and real wage growth remained low."}],[{"start":183.12,"text":"“Japan faces stagflation,” he said. “That’s tough for any central bank. And I doubt the market would be happy with Ueda emphasising these dilemmas.”"}],[{"start":null,"text":""}],[{"start":192.2,"text":"The yen meanwhile has swung violently over the past six weeks while yields on closely watched 10-year Japanese government bonds have surged to the highest level in 30 years. Yields move inversely to prices."}],[{"start":204.96,"text":"Currency analysts warned that a perceived mis-step by the BoJ, or a poorly received message from the governor, risked rekindling a rapid unwinding of the “carry trade”, where speculative investment is fuelled by cheaply borrowed yen."}],[{"start":217.76,"text":"But the yen’s rapid rally over the past week — strengthening past ¥153, to levels not seen since February and beyond what earlier interventions achieved — has also given political cover to Ueda to be less hawkish, analysts said."}],[{"start":232.88,"text":"The BoJ and Ueda’s greatest fear is that by moving too aggressively, they risk pushing Japan’s economy back into deflation, a situation they have spent decades trying to escape."}],[{"start":242.48,"text":"“If the yen is one of [the government’s], and the BoJ’s, key variables, what’s the need for Ueda, who cares about the real economy data, to take a risk here?” said Shoki Omori, chief strategist at Deutsche Bank in Tokyo."}],[{"start":256,"text":"Goldman Sachs senior economist Tomohiro Ota said that while markets were beginning to price in the possibility of an accelerated pace of rate rises — such as consecutive moves in September and October — that outcome was unlikely unless inflation significantly overshot expectations."}],[{"start":272.74,"text":"The BoJ’s statement and Ueda’s press conference will be combed for any change in wording on increased inflation risks from the war in the Middle East, AI-related demand and a weaker yen, Ota said."}],[{"start":284.24,"text":"Critically, analysts will be looking for whether the phrase “financial conditions have been accommodative” survives even after the policy rate is raised."}],[{"start":292.44,"text":"With the stakes so high, Ueda’s best hope is to avoid breaking an extremely delicate equilibrium, Citi’s chief Japan foreign exchange strategist Osamu Takashima said. “Ueda will try not to surprise the market . . . the market is becoming fragile.”"}],[{"start":292.94,"text":"Data visualisation by Haohsiang Ko in Hong Kong"}],[{"start":313.93,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1789367248_1972.mp3"}