Japan’s transformation from sleeping economic giant to magnet for growth and investment is set to face its fastest sequence of interest rate hikes since the bursting of Tokyo’s asset bubble more than a generation ago. Amid a wave of pressure from U.S. Treasury Secretary Scott Bessent, chronic weakness in the yen and prices that keep going up, the Bank of Japan looks set to raise benchmark borrowing costs for the third time in less than 10 months at its meeting on Friday.
That would mark the fastest pace of interest rate hikes since 1990, when Japan was still seen as a rival to U.S. global economic dominance. Four outsize rate increases in less than a year back then brought the Tokyo stock market to its knees and marked the beginning of the nation’s descent from overheated growth into economic stagnation. This time around Japan is on a more modest growth path and the most obvious dangers lie in the currency and bond markets.
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