BoJ Tipped to Hike Rates as Japan's Inflation Pressures Mount

Japan's monetary policy is set to tighten as the Bank of Japan (BoJ) prepares to raise its policy rate. Economists Deepali Bhargava and Lynn Song from ING expect a 25bp hike to 1.25%, citing persistent price pressures.

The economists project two further 25bp hikes in January and April 2027, taking the rate to 1.75%. This would be a front-loading of rate hikes, with policymakers potentially preferring to tighten while inflation remains elevated.

Market consensus expects Japan's August headline inflation data to show a year-on-year increase to 2.0%, while core inflation remains unchanged at 1.8%.