BOJ May Raise Rates Next Month... 8 of 14 Experts Expect an Increase

[Financial News, Tokyo = Reporter Seo Hye-jin] Expectations are growing in financial markets and among experts that the Bank of Japan (BOJ) will raise its policy rate by 0.25 percentage point to 1.25% next month. Based on short-term money market trading, the probability of a September rate hike stood at 81%, and 8 of 14 economists also expected a move in September. Rising global oil prices and a weaker yen are increasing the risk of another jump in prices, while U.S. pressure to correct the weak yen is adding momentum to calls for an early hike.
According to the Yomiuri Shimbun on the 25th, the September rate-hike probability calculated by Doton Research based on market participants' trading trends was 81% as of the previous afternoon.
In a survey by the Yomiuri Shimbun of 14 economists, eight said the BOJ would raise its short-term policy rate target from the current 1.0% to 1.25% at its September meeting. The BOJ will hold its monetary policy meeting on the 17th and 18th of next month.
Concerns over inflation are behind the push for an early hike. Rising global oil prices and a weaker yen are pushing up import prices, fueling worries that consumer prices could exceed the BOJ's forecasts.
Nobuyasu Atago, chief economist at Rakuten Securities Economic Research Institute, said the 'underlying inflation rate,' excluding temporary factors, is shifting from a phase of moving toward 2% year on year to one in which it must be kept at 2%. His point was that the BOJ is entering a stage where it should focus less on lifting inflation to its target and more on preventing further increases.
U.S. demands to correct the weak yen are also supporting an early BOJ hike. On the 31st of last month, the U.S. and Japanese monetary authorities jointly intervened in the market to buy yen. After that, U.S. Secretary of the Treasury Scott Bessent made remarks suggesting that a BOJ rate hike would be necessary to address the weak yen.
Yuichi Kodama, a researcher at the Meiji Yasuda Research Institute, said that the U.S.'s de facto call for a rate hike would act as a tailwind for the BOJ.
Five experts expected the BOJ to keep rates unchanged in September and raise them at the next meeting, on October 29-30. Even among them, however, some said the timing could be moved up to September if the yen weakens further.
Seisaku Kameda, an economist at Sompo Institute Plus, said, "If the yen-dollar exchange rate again moves beyond 160 yen per dollar and the weak yen deepens, a September hike is possible."
The most common forecast for the final policy rate in this tightening cycle was 1.75%, with eight experts choosing that level. That would require three 0.25 percentage point hikes from the current 1.0% policy rate. Three experts forecast 1.5%, two expected 2.0%, and one predicted 2.5%.

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