Bank of Japan expected to raise rates

The Bank of Japan is expected to hike interest rates again by year-end. This is the main finding of a poll of economists carried out by the news agency Reuters.

“The findings reflect analysts’ conviction the BOJ is undeterred from gradually retreating from decades of huge monetary stimulus even as its global peers, including the US Federal Reserve, tilt toward interest rate cuts,” Reuters said. “While most investors expect a 25 basis point cut in September, some are wondering if it will be double that.”

The current policy rate is extremely accommodative, the agency quoted Atsushi Takeda, chief economist at Itochu Research Institute, as saying. “The BOJ will continue to raise interest rates toward the neutral rate as long as the 2 per cent price stability target is expected to be achieved.”

The central bank surprised many market participants in July by raising base borrowing costs to 0.25 per cent from a range of 0-per cent-0.1 per cent, just four months after abandoning negative rates.

At the time, BOJ Governor Kazuo Ueda signaled the likelihood of steady rate hikes in coming years.

Japan’s economy grew at a much faster-than-expected 3.1 per cent annualized rate in the second quarter, rebounding from a slump at the start of the year on account of a robust increase in consumption.

Growth was predicted at 0.6 per cent this fiscal year ending March 2025 and 1.1 per cent in the next, the poll showed. Inflation will average 2.4 per cent this fiscal year and 1.9 per cent in the next.