BOJ to Hike Rates Again Amid Weakening Yen and Inflation Risks

The Bank of Japan (BOJ) is likely to raise interest rates again by December and possibly as soon as October, according to a majority of economists in a Reuters poll. This decision comes as the weak yen revives inflation risks in Japan.

A total of 86% of the 87 economists polled expected the BOJ to hike its policy rate to 1.25% by end-December, up from 79% in June. Of those who specified a month, 53% chose December, while 35% picked October and 8% said January or later.

Kazutaka Maeda, senior economist at Meiji Yasuda Research Institute, expects an October rate hike due to the need to counter inflationary and yen-selling pressure. Atsushi Takeda, chief economist at Itochu Research Institute, also forecasted the next hike in December but warned that an early additional rate hike could heighten expectations among companies' borrowing costs will rise further.

Nearly three-quarters of respondents said the BOJ was not moving too slowly on rate hikes, citing underlying inflation yet to stabilise at 2% and lingering downside risks from the Middle East war. However, nearly 80% of economists expressed concerns over the country's finances and the yen's strength.