BOJ to Hike Rates Every Quarter as Inflation Pressures Mount

The Bank of Japan is expected to continue raising interest rates in the coming quarters to combat inflationary pressures. According to former bank board member Makoto Sakurai, the BOJ will likely increase rates every quarter and push them up to 2% by June next year.

Sakurai believes that the central bank's new policy approach, which focuses on addressing broadening price pressures, is a response to mounting inflationary pressures. He notes that Japan has seen a significant spike in crude oil costs, with prices increasing around 70%-to-80% in recent months.

The BOJ raised interest rates to 1.25% last week, and Sakurai expects the central bank to hike rates again most likely in December, followed by further increases in 2027. He predicts that interest rates will reach 1.5% by year-end, 1.75% in the first quarter of 2027, and finally 2% by June next year.

Sakurai also notes that 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. He adds that even if the BOJ raises rates aggressively, it will only slow the yen's declines at best.