The OECD expects Japan’s central bank to raise its policy rate to 2% by end-2027 amid sustained inflation and wage growth.
The OECD projected the Bank of Japan will increase its policy rate to 2.0% by the end of 2027, up from the current 0.75%. The forecast reflects expectations of higher inflation, solid wage growth, and a closed output gap supporting monetary tightening.
Japan’s current rate stands at 0.75%, following a historic shift away from negative rates earlier this year. The OECD’s outlook aligns with broader market expectations of gradual normalization, though earlier projections had not extended this far into the future.
No immediate market reaction was specified, but the forecast signals potential long-term shifts in yen valuation and Japanese bond yields.