BoJ Expected to Raise Rates Again by End of December

A majority of economists polled by Reuters expect the Bank of Japan (BoJ) to raise its interest rate again by the end of December, with a possible hike as soon as October. This is according to the latest survey results, which show that 86% of respondents believe the BoJ will increase its key interest rate to 1.25% by the fourth quarter. This is a slight increase from the 79% who expected this outcome in June.

Furthermore, 70% of economists anticipate the BoJ to hike rates to at least 1.50% in the second quarter of 2027, while 51% see 1.50% as the terminal rate. The survey also found that a significant majority of respondents, 58%, consider the impact of Japanese Government Bonds (JGB) yield increase on Japan's debt-financing costs in the next two to three years to be 'very' or 'somewhat' concerning.

The USD/JPY pair is currently trading around 163.07, which is slightly weaker than the 160 level that 79% of economists believe is too weak relative to Japan's economic fundamentals.