A media survey shows that slightly more than half of the Bank of Japan observers believe that the next interest rate hike by the central bank will be in December, and no one expects the authorities to take action at the meeting next week.

The survey shows that out of 53 economists, about 87% of respondents predict that the Bank of Japan will raise borrowing costs by the end of January, and 53% of them believe that it is most likely to happen in December. The survey results indicate that the majority of analysts believe that the market volatility in the few days following the BOJ's interest rate hike on July 31st is not enough to make authorities panic and abandon the path of rate normalization.

The Bank of Japan will conclude its two-day policy meeting on September 20th. Governor Haruhiko Kuroda and other board members have recently emphasized the need to monitor the still volatile Japanese financial markets and stated that they will not rush to choose an interest rate hike.

Masamichi Adachi, Chief Japan Economist at UBS Securities, said, "The likelihood of a rate hike at this meeting is extremely low. It is too early to determine the impact of the July rate hike and market plunge."

Another interest rate hike before the end of the year.

In July of this year, the Bank of Japan raised the benchmark interest rate from the range of 0% to 0.1% to 0.25%, marking the second rate hike this year. This accelerated the rebound of the yen and led to a market crash in Japan, with the Nikkei index plummeting more than 12% on August 5, subsequently causing a global market meltdown. This was another "Black Monday" that panicked investors.

Since then, the deputy governor of the Bank of Japan, Shinichi Uchida, has stated that the central bank will not raise interest rates during market instability. Governor Haruhiko Kuroda has a similar stance, but has also stated that if the data shows that Japan's economy and prices are in line with the central bank's expectations, the Bank of Japan will continue to raise interest rates.

Tomoko Amaya, a former senior official at the Japanese Financial Services Agency, stated that given the recent market volatility (known as 'Black Monday') has not had a lasting impact, the Bank of Japan may still raise interest rates again before the end of the year.

In addition, Tsutomu Watanabe, a former official of the Bank of Japan and one of Japan's leading inflation experts, also stated that the Bank of Japan's interest rate hikes may be faster than expected by everyone, and there may be two more hikes this year. He believes that although the price trend has not strengthened, the Bank of Japan's key statement that inflation is "on track" means that the Bank can basically take action at any time.

Impact of the Federal Reserve

It is worth mentioning that before the end of the Bank of Japan's policy meeting, the Federal Reserve is expected to announce the long-awaited interest rate cut measures. The above survey results show that about 56% of economists believe that the rate cut in the United States may have an impact on the interest rate path of the Bank of Japan. Economists will closely monitor the impact of this move on the US economy and the yen.

Chotaro Morita, Chief Strategist at All Nippon Asset Management Co., said that global market participants are discussing the possibility of a slowdown or recession in the US economy, and they believe that the Federal Reserve's interest rates may fall below 3% in the future. If the economic environment forces its interest rates to be lower than 3%, it will be impossible for the Bank of Japan to raise interest rates.

Impact of the election

Economists are trying to determine whether the leadership election of the Liberal Democratic Party (Japan's current ruling party) will affect the policy path of the Bank of Japan. The election for the president of the Liberal Democratic Party was announced on September 12, with 9 candidates participating, and the vote was held on the 27th. Since the Liberal Democratic Party holds the majority of seats in the National Diet of Japan, this also means that whoever wins will be the next prime minister of Japan.

Among the 36 economists who answered this question, 86% of them believe that Akira Amari, who advocates for relaxed monetary policy, will make the normalization task of the Bank of Japan the most difficult. Several other candidates expressed support for tightening monetary policy to support the yen and curb inflation.

"At the same time, the US presidential election may also have a significant impact on the financial market," said Katsuhiko Aiba, an economist at Citigroup Global Markets Japan. "This means that the policy meetings of the Bank of Japan in September and October will be an opportunity to examine the financial market and economic conditions."