BOJ Rate Hike Prediction Revised to September Amid Weakening Yen

Goldman Sachs has revised its prediction for when the Bank of Japan (BOJ) will raise interest rates. According to Goldman's Japan economist Tomohiro Ota, the BOJ may hike rates as early as September 2026, instead of January 2027. This is a significant revision, and it reflects changing circumstances in the Japanese economy.

The core logic behind this change is that medium- to long-term inflation expectations are approaching 2%, which is the BOJ's target rate. The yen exchange rate is also nearing its previous sensitive zone, which adds pressure on the central bank to act. If the BOJ stands pat and allows the yen to continue weakening, it may fuel further inflation expectations and rate-hike bets in a self-reinforcing loop.

Goldman estimates that a 10% yen depreciation would push up new core CPI by around 0.4 percentage points on a year-over-year basis after 12 months. This is a significant impact, and it makes the exchange-rate factor the most direct driver of September rate-hike expectations.