Citigroup’s Japan markets chief warns the Bank of Japan may raise interest rates three times in 2026, potentially doubling current levels if the yen’s weakness persists. The forecast underscores growing market pressure on Japanese monetary policy as the currency hovers near multi-decade lows against the dollar.

Persistent yen depreciation has fueled import costs and inflation, complicating the BOJ’s path away from its ultra-loose stance. A series of rate hikes would mark a significant policy shift, impacting Japanese government bond yields and global carry trades. Investors are closely watching for signals of a sustained tightening cycle.

The BOJ’s next moves will hinge on wage growth and inflation data. If the yen remains weak, policymakers may feel compelled to act, altering the investment landscape for Japanese equities and currency markets. The scenario highlights how external pressure can force central banks into unexpected action.