Reuters, Tokyo The vast majority of economists polled by Reuters predicted that the Bank of Japan would raise interest rates to 0.50% at one of the two meetings this quarter, with the majority pointing to a January increase.

Even if the majority of its international counterparts continue to lean toward rate reduction, the findings demonstrate the BOJ's resolve to move further toward more normal monetary policy following years of extremely supportive settings.

According to a Jan. 8–15 poll published Thursday, 59 out of 61 analysts, with the exception of two, predicted that the BOJ would increase borrowing costs once more, to 0.50% by the end of March.

Just under two-thirds (20) of the 32 respondents who indicated that they expected a rise this quarter and which month they thought it would occur mentioned March during the Jan. 23–24 meeting.

Given the uncertainties surrounding domestic wages and the economic ambitions of U.S. President-elect Donald Trump, who returns to the White House on January 20, observers have been speculating about when the BOJ will hike rates next after policymakers held rates in December.

The central bank will discuss whether to hike rates at its next meeting, according to statements made earlier this week by BOJ Governor Kazuo Ueda and Deputy Governor Ryozo Himino.

Ayako Fujita, chief Japan economist at JPMorgan Securities, stated that the argument for a January raise is strengthened by rising pricing pressures and strong domestic wage momentum.

"If the inauguration of incoming U.S. President Trump does not cause major market turmoil, delaying the interest rate hike until March is seen as excessively increasing market volatility risk," Fujita stated.

According to the BOJ, last week's wage increases were affecting businesses of all sizes and industries, indicating that the framework for a short-term increase was still being established.

In July 2024, the central bank adjusted its short-term policy target to 0.25% after ending negative interest rates in March 2024. It increased its belief that Japan will sustain 2% inflation and indicated that it was prepared to raise again if wages and prices moved as anticipated.

Of the 22 economists who responded to an additional question, all but one thought it was more likely that Japan's inflation would fluctuate higher than they had anticipated this year.
Harumi Taguchi, principal economist at S&P Global Market Intelligence, stated, "There is a higher risk of inflation rising than of it falling, due to the risk of the yen weakening for longer than expected over factors like a delay of interest rate cuts in the U.S."

Furthermore, a poll conducted last month found that the median of 23 experts who expressed opinions on the rate of pay rises at this year's spring labor-management negotiations was 4.75%, a tiny increase from 4.70%. It was greater than the previous year's 3.58% but lower than the 5.1% from the previous year.

Atsushi Takeda, chief economist at Itochu Research Institute, stated that the BOJ cannot ignore the weak yen because growth and inflation are following its prediction and import prices are thought to have turned positive year-over-year in December.

The BOJ's decision to start raising interest rates was influenced by a number of reasons, including the weak Japanese yen, which has increased inflation and import costs.
Two-thirds of those surveyed, or 14 out of 21, stated that if the value of the yen drops to 165 vs the US dollar, Japanese authorities will step in and meddle in the currency market. Four, or nearly 20%, said 160 yen.