BOJ Seen Raising Rates Quarterly as Inflation Pressures Mount

The Bank of Japan (BOJ) is expected to raise interest rates approximately every three months as inflation pressures build. According to former BOJ board member Makoto Sakurai, the central bank will likely revise up its inflation forecasts in its quarterly outlook report due in October.

Sakurai predicts that consumer inflation may exceed 3% by early 2025, forcing the BOJ to accelerate tightening to prevent underlying inflation from overshooting its 2% target. He expects rates to rise from 1.25% to 1.75% in the first quarter of 2027 and to 2% by around June next year.

The terminal rate is seen around 2%, though it could move higher if inflation remains elevated near 3%. Sakurai also notes that support for higher Japanese rates from U.S. Treasury Secretary Scott Bessent likely reinforces the BOJ's confidence that it can move faster.