BOJ to Raise Rates Every Quarter Amid Inflation Pressures

The Bank of Japan (BOJ) is expected to raise interest rates roughly once every three months, according to former board member Makoto Sakurai. This move aims to combat mounting inflationary pressures and push interest rates up to 2 per cent by around June next year.

Sakurai noted that the BOJ has shifted its policy approach to focus on addressing broadening price pressures from surging fuel costs. The cost of importing crude oil in Japan has spiked around 70-80 per cent in recent months, which will boost consumer inflation ahead.

Consumer inflation may exceed 3 per cent by year-end through early next year, forcing the BOJ to step up hikes to keep underlying inflation from overshooting its 2 per cent target. Sakurai said 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.

After the rate hike to 1.5 per cent expected by year-end, the BOJ will likely raise rates to 1.75 per cent in the first quarter of 2027 and to 2 per cent by June next year, Sakurai added.