Approximately 56% of the 45 Bank of Japan observers expect the next interest rate hike to take place in July, following the central bank's decision last Friday to raise rates to the highest level since 2008.
The Zhito Finance APP noted that according to a survey of economists, the Bank of Japan may not raise interest rates again until summer. In a survey conducted on Monday, about 56% of the 45 observers of the Bank of Japan expect the next rate hike to occur in July, following the decision to raise rates to their highest level since 2008 last Friday.
September is the second most popular timeframe, with 18% of respondents predicting an interest rate hike at that time, while 9% indicated it could happen in June.
Bank of Japan Governor Kazuo Ueda oversaw his third rate hike during his tenure last week and committed to further rate increases if the bank's economic outlook is achieved. The survey indicates that the central bank may pause for a while before raising rates to the highest level since 1995 of 0.75%.
Tsuyoshi Ueno, a senior economist at the Japan Life Foundation, wrote in his survey response: "I expect rate hikes approximately every six months. If the yen depreciates significantly, the timing of rate hikes may advance, while if U.S. tariffs have a significant impact, the timing may be delayed."
The survey results emphasize Governor Ueda's intention to gradually unwind the Bank of Japan's easing policy settings. After the third interest rate hike during the governor's tenure last week, Ueda and the committee may need some time to determine whether the economy and prices are still progressing according to their forecasts.
Many observers of the Bank of Japan have pointed out that the weak yen could be a potential reason for a rate hike occurring earlier than the baseline scenario. Since last Friday's interest rate decision, the yen has remained around 155 against the US dollar, showing little change even after the central bank's rate increase. About 45% of the surveyed Analysts indicated that April is the earliest timeframe for the next rate hike in their risk scenarios.
Despite a calm currency market, US President Trump announced comprehensive tariffs on Colombia this week, only to suddenly withdraw the threat after reaching an agreement on the deportation of immigrants, indicating he may continue to disrupt Global markets. Analysts remain cautious about the risk of Japan being suddenly affected by the policies of this new president.
Among observers of the Bank of Japan, the median estimate for the policy interest rate by the end of this year is 0.75%, and 1% by the end of 2026, consistent with the findings from a Bloomberg survey conducted prior to the January meeting.
Economists believe that Ueda Kazuo hopes to raise the policy interest rate to 1.25% in the current normalization cycle that began in March, but they expect the terminal interest rate median to be slightly lower at 1%.
Before this month's meeting, the Bank of Japan, led by Ueda, clearly indicated that it would take action and successfully avoided a repeat of July's situation. Last summer, the central bank contributed to a global market crash due to insufficiently warning about the interest rate hike.
Meanwhile, Analysts have differing opinions on the Bank of Japan's communication style this time. About 41% said that the central bank's guidance before the January meeting was neither good nor bad. Approximately 32% felt it was bad, while 23% believed it was good or very good.
Kazuhiko Sano, chief strategist at Tokai Tokyo Securities, stated: "The Bank of Japan's communication style is not praiseworthy, but at the same time, there are many issues with the market's response to it."
When asked whether the central bank should ensure that interest hikes are almost fully reflected in market pricing as was done this month, 52% agreed or strongly agreed, while 33% disagreed or strongly disagreed.
Mitsumaru Kumagai, the Chief Economist of Daiwa Institute of Research, stated: "The significant improvement in communication between the central bank and the market should be recognized. I expect the Bank of Japan to continue raising interest rates while maintaining cautious communication."
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