Nearly 90% of economists expect another Bank of Japan rate increase by December, with October seen as a potential move amid yen depreciation.
The Bank of Japan’s June summary revealed growing internal debate over accelerating rate hikes, with some members advocating increases every few months. This shifts market expectations from earlier projections, tightening the timeline for further tightening amid persistent yen weakness near 40-year lows.
Economists now forecast a peak policy rate of 1.75% by year-end, up from prior estimates, while over a third anticipate an October move. Wholesale inflation hit a three-year high of 6.3% in May, reinforcing hawkish arguments as import costs rise. The lone dissent from board member Asada highlights tensions between growth objectives and tightening.
The yen’s decline, despite the June hike, complicates the BOJ’s inflation narrative, as exchange rate pressures continue to drive import costs. Revised rate expectations are poised to impact JGB yields, JPY carry trades, and broader Asian rates markets.