BoJ Hikes Forecasted to 1.75% by April 2027

Oxford Economics has revised its forecast for the Bank of Japan's (BoJ) policy rate, predicting it will increase to 1.75% by April 2027.

This new projection is higher and faster than previously anticipated, with the BoJ expected to raise rates in September, December this year, and April next year.

The forecast is driven by the need to address pressure on the yen and rising inflation expectations. The US-Japan joint intervention in late July had a short-lived impact but increased pressure on the BoJ to accelerate rate hikes.

Financial markets seem to reflect the idea that faster rate hikes are demanded in exchange for intervention, making it difficult for the BoJ and government to ignore market expectations.