BOJ to Raise Rates Once More This Year to 0.75%, Most Likely in Q3: Reuters Poll

The Bank of Japan (BOJ) is expected to raise interest rates once more this year, with a Reuters poll of economists suggesting a quarter-point increase to 0.75% in the third quarter. This move comes as the BOJ seeks to normalize monetary policy and maintain price stability in the face of rising inflation and a recovering economy.

The BOJ's Outlook Report projects that Japan's economy will continue to grow at a pace above its potential growth rate, with overseas economies also growing moderately. Inflation is expected to move towards around 2 percent, with the year-on-year rate of increase in the CPI likely to be at around 2.5 percent for fiscal 2025 and then be at around 2 percent for fiscal 2026. Underlying CPI inflation is expected to increase gradually and then be at a level that is generally consistent with the price stability target of 2 percent.

However, there are high uncertainties surrounding Japan's economic activity and prices, including developments in overseas economic activity and prices, developments in commodity prices, and domestic firms' wage- and price-setting behavior. The BOJ will need to closely monitor these factors and adjust its policy accordingly to maintain its 2 percent inflation target and support sustainable economic growth.

The BOJ's decision to raise interest rates further is supported by its projected inflation trajectory and economic growth outlook. The BOJ's board member, Hiroshi Yoshikawa, has suggested that the BOJ had better move early while it can, as it may already be behind the curve. This inflation trend contributes to the BOJ's decision to raise interest rates.

The BOJ's Governor, Kazuo Ueda, has stated that the BOJ will keep adjusting the degree of monetary accommodation if its outlook for economic activity and prices is realized. The BOJ will likely wait for more data and a clearer picture of wage trends and overseas economies before deciding on an additional rate hike.

In conclusion, the BOJ is expected to raise interest rates once more this year, with a Reuters poll suggesting a quarter-point increase to 0.75% in the third quarter. The BOJ's decision is supported by its projected inflation trajectory and economic growth outlook, as well as the need to maintain price stability and support sustainable economic growth. The BOJ will closely monitor economic developments and adjust its policy accordingly to achieve its 2 percent inflation target.