Takaichi adviser Takuji Aida, who opposed a December hike, now expects the BoJ to lift rates from 1% on 18 September, then three more times. Markets price 1.25%, the highest since 1995. July CPI: 1.9%.

Late-July yen near ¥164/$, weakest in ~40 years. Tokyo spent ~$85bn in two days; the U.S. sold euros for yen (first joint support since 1998). That does not close the rate gap and undercuts a planned food-tax cut (8%→1% from April 2027). Ueda said September would weigh upside inflation risks; April’s BoJ outlook already had core at 2.5–3%.

10-year JGB yield near 3% (first since 1996); debt >200% of GDP. Obstfeld: defend the yen or the budget—not both. Setser: a weak yen hits other Asian currencies. If Japanese savings stay home, a big pool of global funding shrinks.

On Monday, September 7, in Tokyo, an economist who has spent a year arguing that the Bank of Japan (BoJ) should wait to hike interest rates published a note saying it no longer can. Takuji Aida, who advises Prime Minister Sanae Takaichi, sits on her flagship growth-strategy panel, and 10 months ago he warned that a December rate rise would be quite risky. He now expects a rate rise from 1% on September 18, followed by three more rate hikes after that.

Aida’s forecast is, in itself, unremarkable: markets seem prepared for such a shift, having nearly fully priced a quarter-point move to 1.25%, the highest rate the BoJ has risen to since 1995. What is remarkable is the source of the rise. Aida is a reflationist, the doctrine upon which Takaichi’s government was built—cheap money, proactive fiscal policy, and the conviction that tightening belts will return Japan to deflation. Inflation in Japan currently stands at 1.9% in July, having risen from 1.6% in June. This was the policy that........

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