(June 18): An overwhelming majority of Bank of Japan (BOJ) watchers anticipate the central bank will raise interest rates again by the end of this year, following a hike to the highest level since 1995 earlier this week, according to a Bloomberg survey.
Some 90% of 44 economists forecast the BOJ will raise its benchmark rate from 1% by the December meeting, according to the poll conducted on Wednesday. That month is the most popular timing as picked by 52% of the respondents, while 36% say it will come in October. In response to a separate question about the earliest possible timing of the next hike, nearly a quarter pointed to September.
The BOJ increased borrowing costs on Tuesday for the first time since December as it noted a risk of underlying inflation overshooting its 2% goal. A key question is whether or not the bank needs to act a little faster than its widely seen pace of moving once every six months.
“With the bank now seeing diminished downside risks to economic activity and increased upside risks to inflation, we expect policymakers to accelerate their tightening cycle going forward,” Marcel Thieliant, the head of Asia-Pacific at Capital Economics, wrote in the survey response. “We now expect the bank to hike rates in October again followed by three additional hikes in 2027.”
That would put the BOJ’s overnight call rate at 2% by the end of 2027, at the higher end of forecasts in the survey. The median estimate pegs the rate at 1.5% by then, implying just one hike next year after another one in 2026. BOJ watchers now see interest rates topping out at 1.75% this cycle, up from a median estimate of 1.5% in a survey conducted earlier this month.
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Deputy governor Shinichi Uchida hosted a post-meeting press conference after governor Kazuo Ueda was hospitalised last week. Many respondents noted that Uchida didn’t give a clear signal for the acceleration of raising rates.
The yen remained stable at around 160 per dollar after Tuesday’s meeting as traders remain wary of further currency intervention. After US Federal Reserve officials signaled growing support for rate hikes this year, the yen slid to its lowest level against the dollar since July 2024, boosting intervention risk. Those decisions followed a rate hike by the European Central Bank last week.
“As the US and Europe begin shifting towards rate hikes, the BOJ will likely have no choice but to accelerate its pace of rate increases from previous expectations in order to avoid falling further behind the curve,” said Naka Matsuzawa, the chief strategist of Nomura Securities.
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Speculation over a BOJ June rate hike gained momentum after a split vote at April’s meeting, in which three officials dissented in favour of an increase. Some policymakers who voted to hold at that meeting recently spoke in favour of raising rates. Two-thirds of respondents said the BOJ’s communications were either good or very good ahead of this week’s decision, while only 5% said they were bad.
“Decisions at each policy meeting are likely to take more significance rather than simply following a pre-set normalisation path,” said Chotaro Morita, the chief strategist of All Nippon Asset Management. “The BOJ will also come under greater pressure to explain in detail how it assesses economic and price developments when communicating its policy decisions.”
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