Bank of Japan May Raise Rates Four Times by 2028, Former Board Member Predicts

A former member of the Bank of Japan's Policy Board has predicted that the central bank may raise its benchmark interest rate at least four times during the tenure of Governor Ueda, bringing it to 1.5% by the end of his term in 2028. The former member, who remains closely connected with current policymakers, anticipates that the first rate hike could occur before the end of this year, with two more increases expected in the fiscal year 2026, and the final adjustment in March 2028.

The prediction comes as the Bank of Japan continues to navigate a complex economic landscape, balancing the need to control inflation with the goal of sustaining economic growth. The former member's forecast suggests a more aggressive stance on monetary policy than some market participants may have anticipated, indicating a potential shift in the central bank's approach to managing interest rates.

The former member's insights are particularly noteworthy given their extensive experience and ongoing engagement with the current policy-making apparatus. Their prediction of at least four rate hikes over the next few years reflects a belief that the economic conditions will warrant such measures to keep inflation in check and support the overall health of the economy.

The potential for multiple rate increases underscores the Bank of Japan's commitment to adapting its monetary policy in response to evolving economic conditions. As the central bank continues to monitor key economic indicators, its decisions will have significant implications for businesses, consumers, and investors alike. The former member's forecast serves as a reminder of the importance of staying informed about the central bank's policy direction and its potential impact on the broader economy.

In January, the Bank of Japan raised its short-term policy interest rate to 0.5%, but has since maintained stability, citing the need for more time to assess the impact of U.S. tariff policies on the economy. The former member expects the next rate hike window to be in October or December, with the quarterly "short-term" business survey data released on October 1st serving as a crucial decision-making factor. If the data shows that business confidence and profits remain resilient, it could support a rate hike in October.

However, the former member acknowledges that the Bank of Japan lacks sufficient hard data to determine whether the impact of U.S. tariffs will remain limited, introducing an element of uncertainty. Notably, in September, two members of the Bank of Japan's board voted against maintaining the current interest rate, which the former member interprets as a signal to the market that a rate hike is imminent, potentially increasing the likelihood of an October rate hike.

Earlier surveys indicated that most economists expect the Bank of Japan to raise interest rates by 25 basis points before the end of the year, although some believe the hike could be delayed until January 2026. The former member also highlighted external factors, such as the U.S. government's weak dollar policy, which could exert pressure on the Bank of Japan to raise interest rates. The former member cited remarks made by the U.S. Treasury Secretary in August, who suggested that the Bank of Japan was lagging behind in addressing inflation.

Additionally, the September joint statement by the U.S. and Japan reaffirmed the principle of market-determined exchange rates, which was interpreted as a warning from Washington to Tokyo to avoid market intervention to suppress the yen's appreciation. The former member analyzed that, with the Federal Reserve's interest rate cut cycle beginning, the yen's strength against the dollar is a natural trend, and the yen may continue to appreciate in the future.