What did former Bank of Japan board member Seiji Adachi say about the BOJ’s likely monetary policy path—including the expected September 18 rate hike from 1% to 1.25%, the possibility of another increase as early as January, the roughly 80–90% market implied probability of a Sept

Adachi’s message was that the BOJ is now more likely to validate, rather than disappoint, a market that has substantially priced a September 18 increase from 1.0% to 1.25%. He saw a further move as early as January, with a delay risking a renewed yen selloff and higher import-driven inflation. 1315

• Why “boxed in”: Markets had put the probability of a September hike at roughly 76%–80% (with some reporting nearer 90%), up sharply after the late-July U.S.-Japan currency intervention. 113 Adachi’s logic was that a hold would undermine the intervention’s currency-supporting effect and invite another round of yen selling. 15

• Political and FX pressure: Treasury Secretary Scott Bessent urged Japan to follow intervention with supportive “policy and fundamentals,” widely read as pressure for less dovish BOJ policy. 1 While Prime Minister Sanae Takaichi had been associated with caution about aggressive tightening, reports said her government supported a near-term BOJ move in September or October. 26 With the yen again near ¥158.9 per dollar, intervention alone did not look like a durable solution without a more credible rate path. 416

• Adachi’s rate path: He expected the policy rate to reach about 2% or a little more by the end of 2027, materially above the approximately 1.5% economist consensus cited in the question. A Taylor-rule-style calculation could point as high as 2.75%, though that is a mechanical benchmark rather than necessarily his central forecast. This implies a pace faster than the BOJ’s prior pattern of roughly two hikes a year. Earlier in July, Adachi had put a 2027 range at 1.5%–1.75%, showing that his projections have become more hawkish as inflation and yen pressures intensified. 3

• Inflation versus demand: The case for faster normalization is the combination of still-positive underlying inflation—1.8% core inflation in the framing cited—and a 7.2% increase in the corporate-goods price index, which could feed through to consumer prices and push consumer inflation above 2.5%. The counterweight is fragile household demand: spending fell 0.1% year on year in April–June. Thus, Adachi’s view was not that tightening is costless, but that the risks of waiting—currency weakness and inflation persistence—had become larger than the risks of a carefully paced hike. 15

• Near-term signal: Investors were focused on Deputy Governor Ryozo Himino’s speech for guidance not simply on whether September would bring a hike, but whether the BOJ intends to move beyond its earlier gradual, twice-yearly rhythm.