Traders are treating Thursday’s address by Bank of Japan Deputy Governor Ryozo Himino as a live test of pricing for a September interest rate increase, given his reputation as one of the board’s more hawkish voices. Any emphasis on upside inflation risks or the danger of falling behind the curve would likely support the yen and lift Japanese government bond yields, strengthening the case for a 25 basis point move at the September 17 to 18 policy meeting. By contrast, a more measured message focused on data dependence could prompt traders to scale back hike expectations and add pressure to the yen, which has been trading in the high 158 range against the dollar, with the 160 level watched as a possible intervention line.

The speech also comes during the same week as the Jackson Hole symposium, raising the possibility that commentary from the Federal Reserve could compete with Himino’s remarks for attention in foreign exchange and rates markets.

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Earlier:

BOJ seen hiking to 1.25pct in September as yen weakness accelerates timeline

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Markets are watching Himino’s Saitama speech as the first real signal of whether the BOJ is ready to hike in September.

BOJ Deputy Governor Ryozo Himino is scheduled to speak to business leaders in Saitama at 10:30 JST on Thursday, with a press conference to follow. That is 0130 GMT / 2130 US Eastern time.

Commonwealth Bank of Australia said the speech gives the BOJ an opportunity to validate or push back against market pricing for a 25 basis point hike in September. The bank said, “his speech will provide an opportunity for the BoJ to validate or push back against market expectations for a 25bp interest rate hike in September.”

CBA added that Himino could hint at an imminent move by stressing upside inflation risks or the need to avoid falling behind the curve, language that would be distinctly hawkish relative to the BOJ’s typically cautious communication style.

Himino’s remarks are one of three pre-scheduled board speeches ahead of the September 17 to 18 policy meeting. BOJ board member Hajime Takata is due to speak in Sapporo on September 2, followed by Kazuyuki Masu in a separate address on September 10.

The sequencing resembles a pattern markets have seen around previous BOJ hikes, when officials used pre-meeting speeches to prepare investors for policy changes. Himino and Masu are both viewed by markets as among the more hawkish members of the nine-person board, while Takata dissented at the July meeting in favor of raising rates to 1.25 percent.

The speech comes against a backdrop of mixed domestic data, including weak second-quarter GDP growth, even as board members continue to cite upside inflation risks. That combination helps explain why investors are parsing each pre-meeting appearance closely: the BOJ has not committed to a move, but it has left enough room for officials’ wording to shape expectations before the September decision. It also coincides with the opening of the Jackson Hole economic symposium in the United States, where Federal Reserve commentary is expected to compete for market attention this week.

Should Himino adopt a hawkish tone, traders are likely to see it as reinforcing the case for a September move, adding to a week already dominated by central bank signalling on both sides of the Pacific.