Tomoko Amaya, former senior official of the Japan Financial Services Agency, stated that, given the recent market volatility (i.e. "Black Monday"), there is still a possibility of the Bank of Japan raising interest rates again before the end of the year.

Tomoko Amaya said over the weekend, "Although the market has experienced some volatility in the past month or two, I believe that the market has not lost its confidence."

"What is important is not the level or volatility of stock prices, but the level of confidence. The recovery of market stability is sufficient to make a rate hike possible this year, which will be beneficial for banks," she added.

Tomoko Amaya stated that if the Bank of Japan takes this measure, Japanese banks will benefit from increased profitability. However, she added that the pace of rate hikes is a more concerning factor than the level of interest rates themselves.

"Many banks are adjusting themselves and their investment portfolios to cope with the challenges of rate hikes. I believe there is still room for a rate hike. They can benefit from higher interest rates," she said.

After serving as the first female Deputy Commissioner of the Financial Services Agency of Japan, Tomoko Amaya also became the first female Deputy Director-General in charge of financial services and international affairs. The mission of the Financial Services Agency is to oversee banks and other financial institutions and ensure the stability of Japan's financial system. After retirement, she is now an executive advisor at the Research Institute of Kinki Agriculture and Forestry Central Bank.

In July of this year, the Bank of Japan raised the benchmark interest rate from the range of 0% to 0.1% to 0.25%, marking the second rate hike this year. This accelerated the rebound of the yen and led to a market crash in Japan, with the Nikkei index plummeting more than 12% on August 5, subsequently causing a global market meltdown. This was another "Black Monday" that panicked investors.

Since then, the deputy governor of the Bank of Japan, Shinichi Uchida, has stated that the central bank will not raise interest rates during market instability. Governor Haruhiko Kuroda has a similar stance, but has also stated that if the data shows that Japan's economy and prices are in line with the central bank's expectations, the Bank of Japan will continue to raise interest rates.

In fact, it is not just Tomoko Taniyama who believes that there will be another interest rate hike before the end of the year. Tsutomu Watanabe, a former Bank of Japan official and one of Japan's leading inflation experts, stated last week that the pace of interest rate hikes by the Bank of Japan may be faster than expected by everyone, with the possibility of two more rate hikes this year.

He explained that although price trends have not strengthened, the Bank of Japan views the key judgment that inflation is on a 'track of recovery', which means that the central bank can essentially take action at any time.

As warnings continue to sound, the market is becoming increasingly concerned about the return of 'Black Monday'. And on Monday, Japanese stocks experienced turmoil once again. The Nikkei 225 index opened with a decline of 1.61%, which quickly expanded to over 3% before ultimately closing down 0.48%.

Kathy Lien, Managing Director of FX Strategy at BK Asset Management, said she expects the unwinding of yen carry trades to continue in September, bringing the risk of another large-scale sell-off.

Market analysis believes the medium-term depreciation trend of the yen has ended, and the recent short-term rebound has been quite limited, indicating that the bullish force has not been able to counter effectively. This market behavior may indicate further potential for the yen to appreciate.

In the scenario where the Bank of Japan is unlikely to cut interest rates, the yen's currency reverse flow pattern (i.e. current account outflow and capital account inflow) may continue, and the global assets' downward trend is just the beginning. Without the yen as a driving force, many assets may continue to face downward pressure. This reflects the increasing global market demand for the yen as a safe-haven currency, especially against the current backdrop of rising global economic uncertainty.

Editor/ping