Nomura Securities Co. says the Bank of Japan could raise interest rates at three consecutive meetings through December if yen weakness persists toward 160 per dollar, according to head of FX strategy Japan Yujiro Goto. A quarter-point increase this month "looks reasonable," with back-to-back hikes possible in October and December. This marks a dramatic shift for a BOJ that spent decades battling deflation. The yen has rallied over 2% this week to around 156 per dollar amid expectations for faster tightening and speculation over Government Pension Investment Fund asset allocation changes. Overnight index swaps fully price a 25-basis-point hike by September and another by January.

Governor Kazuo Ueda has signaled a possible move at the upcoming meeting, while hawkish board member Hajime Takata left the door open to an outsized increase. Goto's baseline is less aggressive, seeing at least one hike per quarter with a dollar-yen target of 154. The government's stance is critical, with investors watching Prime Minister Sanae Takaichi for signals on BOJ independence. If she refrains from weighing in, Goto sees scope for yen strengthening beyond 150. Fed policy provides another catalyst, as US policymakers may not rush to raise rates in September, potentially pushing dollar-yen below 155 sooner.