BOJ to Raise Rates Every Three Months: Former Policymaker

The Bank of Japan (BOJ) is expected to raise interest rates roughly once every three months, according to former bank board member Makoto Sakurai.

Sakurai predicts that the BOJ will push interest rates up to 2% by around June next year to combat mounting inflationary pressures. He notes that the central bank has shifted its policy approach from focusing on economic growth to addressing broadening price pressures.

The government data shows Japan has seen a significant increase in the cost of importing crude oil, with prices spiking around 70-80% in recent months due to the US attack against Iran in February. This will boost consumer inflation ahead, Sakurai said.

Coupled with the weak yen and robust AI-related demand, manufacturers' profits are increasing, underpinning the economy and fueling 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 BOJ will likely revise up its inflation forecasts at its quarterly outlook report due in October and raise interest rates again most likely in December. After the rate hike to 1.5% expected by year-end, the BOJ will likely raise rates to 1.75% in the first quarter of 2027 and to 2% by June next year.