Sources: Some officials from the Bank of Japan believe that the timing of interest rate hikes may be earlier than the market expects

According to sources, some Bank of Japan policymakers believe that the possibility of an interest rate hike may come earlier than the market expects, with a significant chance of a rate increase in April due to the continued depreciation of the yen, which could exacerbate already heightened inflationary pressures. Bank of Japan decision-makers are facing a daunting task: to raise the ultra-low borrowing costs that have persisted for years amid growing pressures on growth from global headwinds, while the Japanese economy has just begun to recover from the effects of long-term deflation.

The central bank just raised rates to a thirty-year high in December and is expected to maintain rates at the January meeting. However, sources say that many Bank of Japan policymakers believe there is room for further rate hikes, with some not ruling out the possibility of taking action in April, which would be earlier than the mainstream market expectation (that rate hikes will occur in the second half of this year). Sources indicate that if sufficient evidence emerges showing that Japan will consistently achieve the 2% inflation target, some within the Bank of Japan do not rule out the possibility of taking action sooner.