BOJ Faces Pressure to Raise Rates Amid Weak Yen Inflation Risks

The Bank of Japan is expected to raise interest rates again by the end of December and possibly as soon as October, according to a majority of economists in a recent Reuters poll. This move comes as the weak yen poses inflation risks. Nearly all respondents, 95%, expected the BOJ to keep rates unchanged this quarter.

The central bank raised its interest rate to a three-decade high of 1% in June and is now considering further hikes to combat inflationary and yen-selling pressure. Broadening price pressures and a weak yen have led economists to predict a gradual increase in interest rates, with 86% expecting a 25-basis-point hike by the end of December.

Kazutaka Maeda, senior economist at Meiji Yasuda Research Institute, expects an October rate hike, while Atsushi Takeda, chief economist at Itochu Research Institute, forecasts the next hike in December. However, both economists warn that raising rates too quickly could risk aggravating debt-service concerns and slowing the economic recovery.