The swap market has fully priced in an interest rate hike in September, and Nomura goes further: in an extreme scenario, the Bank of Japan may resort to a rare "triple whammy" within this year.

Nomura Securities recently pointed out that if the pressure on the yen continues to intensify, the Bank of Japan may, under extreme circumstances, raise interest rates three times consecutively before December this year. Yujiro Goto, head of foreign exchange strategy at Nomura, stated in an interview that a 25 basis point rate hike this month "seems reasonable," and that "if the yen's weakness continues to spread towards the 160 level, the possibility of consecutive rate hikes in October and December cannot be ruled out." Goto's remarks highlight the sharp shift in market expectations regarding the Bank of Japan's policiespreviously, the central bank had maintained a cautious approach in the normalization of monetary policy. Since this week, as market expectations for a faster tightening of policies have risen, coupled with speculation that Japan's Government Pension Investment Fund may adjust its asset allocation, the yen has appreciated over 2%, trading around 156 against the dollar. Swap market data shows that the market has fully priced in a 25 basis point rate hike by the Bank of Japan before September, and the expectation of another rate hike before January next year has also been reflected in prices. Bank of Japan Governor Kazuo Ueda has hinted that action at this month's meeting is possible; meanwhile, one of the more hawkish members of the policy committee, Takeda Hajime, has not ruled out the possibility of a significant rate hike or consecutive hikes. Nonetheless, three consecutive rate hikes would still represent an exceptionally aggressive tightening pace for a central bank that has long fought deflation over the past thirty years and kept borrowing costs near zero. Goto's fundamental expectation is relatively moderate. He believes that a rate hike at least once every quarter by the Bank of Japan going forward is reasonable and necessary, maintaining his current target assessment for the dollar-yen exchange rate at 154. Goto also pointed out that the Japanese government's stance on monetary policy could become a key variable in whether the yen can continue to strengthen. Investors are closely monitoring signals from Prime Minister Kimoto Sanaewho has previously expressed reservations about rate hikeshoping to understand whether she supports further tightening by the central bank. "If she continues to express a negative attitude toward rate hikes, the market will feel disappointed, and the yen may face sell-offs again," Goto said. On the other hand, if Kimoto avoids commenting on monetary policy or emphasizes the independence of the central bank, he believes there is potential for the yen to break the 150 level. In addition, the Federal Reserve's policy direction could also become a new catalyst. Recent comments from Federal Reserve officials suggest that U.S. policymakers might not be eager to raise rates in September. Goto stated that if the Federal Reserve stands pat while the Bank of Japan signals hawkishness, the weakness of the dollar could resurface, pushing the dollar-yen exchange rate below the 155 level sooner than the market expects.