MNI INTERVIEW: Ex-BOJ's Kameda Sees Dec Hike, Ueda Not Dovish

The Bank of Japan is likely to raise its 0.5% policy rate 25 basis points in December at the earliest, following Governor Kazuo Ueda’s signal that a hike could come in December or January, former BOJ chief economist Seisaku Kameda told MNI, emphasising that the bank will need clearer data on wage growth before acting.

“While market players interpreted Ueda’s remarks as dovish, I don’t think that’s accurate,” said Kameda, now executive economist at Sompo Institute Plus, referring to Ueda’s comments after the BOJ’s October meeting. “The governor is signaling that the timing of a rate hike is approaching.”

However, Kameda acknowledge the bank had time to act. “The bank’s biggest concern is raising rates on the assumption that wages will rise, only to find wage growth disappoints," he argued. "That would be a ‘nightmare’ scenario for the BOJ, and they want to avoid it." 

Wage growth remains central to the BOJ’s policy decisions. Governor Kazuo Ueda indicated that fiscal 2026 wage hikes would be “plus or minus alpha” compared with this year, signaling he does not expect a sharp slowdown. 

Meanwhile, Japan’s inflation-adjusted real wages fell 1.4% year-on-year in September, marking the ninth consecutive month of decline following a 1.7% drop in August, according to data released Thursday, while the BOJ’s closely watched constant sample data rose 2.2% y/y, slightly down from the prior month's 2.4%.

Markets have steadily increased the odds of a December hike and now give a move higher a 50% chance. Kameda in August told MNI the BOJ would likely hike again in December depending on evolving economic and price conditions. (See MNI INTERVIEW: Ex-BOJ's Kameda Sees Hike By December)

TARIFF IMPACTS

The BOJ is focused on the impact of tariffs on corporate profits and whether capital investment demand remains solid, Kameda noted. 

Key upcoming data include the BOJ’s December Tankan survey, due Dec. 15, and the government’s corporate survey, due Dec. 1, which will help gauge wage momentum. Kameda added that a weakening yen, falling to mid-JPY155 and toward JPY160, could prompt the BOJ to hike, given its implications for inflation alongside wage trends.

“The BOJ doesn’t want to miss the chance of achieving the 2% price target due to premature rate hikes. They aim to act without surprising markets,” Kameda said, noting that close communication with both the government and market participants is crucial. (See MNI POLICY: Ueda Dec 1 Speech Crucial For BOJ Hike Timing)

While the BOJ could wait until January, Kameda warned of the risk that financial markets could destabilise due to unexpected shocks before then. 

The probability of a rate hike in March has declined, but it cannot be ruled out, as the government may require more confirmation on wage growth from the Japanese Trade Union Confederation’s first survey in mid-March, he continued.

Kameda also highlighted potential political risks. The lower house could be dissolved after the government finalises economic stimulus and countermeasures to address high prices. Prime Minister Sanae Takaichi is aiming to complete a stimulus package by late November, with some officials eyeing costs above JPY10 trillion, accompanied by a supplementary budget to fund it, he concluded.