BOJ Set for Regular Rate Hikes Amid Soaring Inflation Pressures

The Bank of Japan (BOJ) is expected to raise interest rates roughly once every three months, according to former bank board member Makoto Sakurai. In a recent interview with Reuters, Sakurai said that the central bank will push interest rates up to 2% by around June next year to combat mounting inflationary pressures.

The BOJ has already raised interest rates to a 31-year high of 1.25%, shifting its policy approach to address broadening price pressures from surging fuel costs, Sakurai said. The cost of importing crude oil in Japan has spiked by around 70%-to-80% in recent months, boosting consumer inflation ahead.

Sakurai also mentioned that a weak yen and robust AI-related demand are contributing to manufacturers' profits, underpinning the economy and fuelling demand-driven price pressures. Consumer inflation may exceed 3% by year-end through early next year, forcing the BOJ to step up hikes to keep underlying inflation from overshooting its 2% target.

The former bank board member predicted that the BOJ will revise up its inflation forecasts at its quarterly outlook report due in October and raise interest rates again most likely in December. He added that if the upward revision to its price forecasts is very large, there's a chance the BOJ could opt to hike in October instead of waiting until December.