Bank of Japan Expected to Raise Interest Rates to 1.50% in December

A recent poll conducted by Reuters indicates that the Bank of Japan (BOJ) is likely to increase its benchmark interest rate to 1.50% in December 2026. This expectation marks a significant shift, with 69% of economists surveyed between October 13 and 19 anticipating the hike, compared to only 36% in the previous month. The poll suggests that about 80% of those who specified a month for the increase chose December, while just 2% expected any action at the BOJ's upcoming meeting ending on October 30.

The anticipated rate hike comes amid rising inflation pressures driven by increased energy and import costs, exacerbated by geopolitical tensions in the Middle East. The yen's relative stability, following a period of heavy selling, also supports the case for a December increase. Economists predict that the BOJ will continue to raise rates quarterly, with expectations for the policy rate to reach 1.75% by the end of June 2027 and a significant portion forecasting a terminal rate of 2.00% or higher.

Political dynamics may influence the BOJ's decision-making process. In September, dissent from two board members nominated by Prime Minister Sanae Takaichi, who favor looser fiscal policy, raised concerns about potential political resistance to tightening measures. Nearly three-quarters of economists believe that further dissent during the next vote could negatively impact the yen, which is currently only about 4% above its 2026 low against the US dollar.

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Source: KLEA News