One in Two Economists Says "BOJ Likely to Delay Rate Hike Until December"

One out of every two economists expects that the Bank of Japan (BOJ) will delay its next interest rate hike until December.

AFP Yonhap News

On July 22 (local time), Bloomberg reported the results of a survey conducted with 52 economists. According to the results, 50% of respondents expect the BOJ to raise interest rates this coming December, while 40% forecast a hike in October.

Fifty-nine percent of respondents predicted that the Cabinet of Japanese Prime Minister Sanae Takaichi, which is known for its dovish stance on monetary policy, will restrict further BOJ rate hikes. Eighty-two percent believe that the BOJ will raise rates approximately once every six months, an increase from 71% in last month’s survey.

The Japanese government is focused on quelling speculation that it might intervene in the BOJ’s policy decisions. The recently released annual economic policy guidelines also made it clear that the BOJ’s independence would be respected. However, skepticism among economists persists. About two-thirds of respondents believe that, even if the wording in the guidelines has changed, the government will not halt efforts to intervene in the BOJ’s independence.

Tsuyoshi Ueno, chief economist at NLI Research Institute, said, “It will not be easy to deliver additional rate hikes in the near term due to the difference in views between the BOJ and the government regarding the pace of rate increases.”

On June 16, the BOJ raised its policy rate to 1% without clear opposition from the government. Sixty-five percent of experts who participated in the survey analyzed that Prime Minister Takaichi had no choice but to accept the rate increase as the yen’s depreciation worsened.

As tensions rise between the United States and Iran and international oil prices surge, the yen-dollar exchange rate recently exceeded 163 yen per dollar—its highest level since 1986. In Japan, which imports the majority of its energy and over half of its food, the weakening yen raises import prices and intensifies inflationary pressures.

With uncertainty surrounding oil price fluctuations and the yen’s ongoing depreciation, more economists are leaving the door open to the possibility of an early rate hike. Respondents who identified September as the earliest point for a policy shift accounted for 37%, up from 23% last month.

Kento Minami, economist at Daiwa Securities, said, “The risk of inflation remains high as the yen’s weakness is pushing up prices,” adding, “The BOJ has begun placing greater emphasis on managing inflation risks, increasing the likelihood that the timing of the next rate hike will be brought forward compared to earlier expectations.”

This monetary policy decision meeting is drawing attention to the BOJ’s revised economic outlook. According to the median of economists’ forecasts, the inflation rate outlook for this year is expected to be lowered from 2.8% to 2.6%, while the outlook for economic growth is expected to be raised to 0.7%.

This content was produced with the assistance of AI translation services.