More than half of the economists surveyed in a Reuters poll published on Wednesday predict that the Bank of Japan (BOJ) will increase interest rates once again by the end of the current year, contrasting with global peers like the U.S. Federal Reserve who opted for interest rate reductions.
The survey, conducted from August 13 to 19, indicated that 57% of the economists surveyed, totaling 31 out of 54 respondents, anticipate a rise in borrowing costs by the BOJ by the conclusion of the year. The median forecast for the year-end interest rate stands at 0.50%, representing a 25 basis points increase.
A prominent viewpoint shared by experts like Atsushi Takeda, Chief Economist at Itochu Research Institute, is that the BOJ will persist in raising interest rates towards the neutral rate as long as the 2% price stability target remains attainable.
Following the unexpected decision in July to elevate base borrowing costs to 0.25% from a range of 0% to 0.1%, BOJ Governor Kazuo Ueda hinted at a series of steady rate increases in the upcoming years. However, subsequent market upheavals prompted a more cautious approach.
Despite BOJ Deputy Governor Shinichi Uchida assuring stability in times of market volatility, economists maintain that the central bank’s fundamental strategy remains intact. Kazutaka Maeda, an economist at Meiji Yasuda Research Institute, emphasized that the recent market fluctuations do not signify a deviation from the BOJ’s envisioned path for rate hikes.
Furthermore, recent data from Japan’s government revealed a stronger-than-anticipated 3.1% annualized growth in the economy during the second quarter. The survey forecasts a growth rate of 0.6% for the fiscal year concluding in March 2025 and 1.1% in the subsequent year. Inflation is projected to average at 2.4% for the current fiscal year and 1.9% for the following one.
