Economist: Highest Probability of BOJ Rate Hike in July, Yen Depreciation May Force Earlier Action

BlockBeats News, January 16 – According to the latest survey by Bloomberg involving 52 economists, exchange rate trends are becoming a key variable influencing the Bank of Japan's (BOJ) policy decisions. Against the backdrop of continued yen depreciation and rising inflationary pressures, market expectations for an earlier rate hike by the BOJ are heating up. The survey shows that all respondents unanimously expect the BOJ to maintain its benchmark interest rate at 0.75% during the policy meeting on January 22–23. Regarding the timing of the next rate hike, July emerged as the most mainstream expectation, supported by 48% of economists, while 17% believe a rate hike could occur in either April or June. Economists generally anticipate that the BOJ's future rate hike pace will remain at once every six months. However, if the yen continues to weaken and drives up inflation expectations, the central bank may be forced to act more quickly. Mitsui Sumitomo Trust Bank economist Junki Iwahashi pointed out that if the USD/JPY exchange rate falls below the 160 threshold, the rate hike schedule could be significantly advanced. Currently, the yen is hovering around 158.5, close to the multi-decade low reached in July 2024. In the survey, three-quarters of respondents believe that the risk of yen weakness forcing the BOJ to hike rates earlier is rising. In terms of the interest rate path, economists have raised their median forecast for the "terminal rate" of this rate hike cycle to 1.5%, the highest level since the survey began in late 2023. Additionally, most respondents believe that the key focus of next week's meeting will be the BOJ's updated quarterly economic outlook report. This report, which incorporates the economic stimulus plan introduced by the Sanae Takaichi government for the first time, may provide important signals for the pace of subsequent rate hikes.