BOJ seen holding rates through March, lifting them to 1% or higher by September, maybeJuly

BOJ's Rate Policy Outlook

The Bank of Japan (BOJ) is widely expected to maintain its policy rate steady through March, with a consensus among economists indicating no change in January and March meetings. This cautious approach follows the rate increase to 0.75%, a 30-year high, seen in December 2022.

Timing for Next Rate Hike

Seventy-six percent of economists anticipate the policy rate to reach 1% or higher by the end of September, with July being the most likely period for the next increase. This sentiment reflects a careful evaluation of the latest hike's impact on the economy and an alignment with the BOJ's annual Outlook Report.

Political Factors at Play

The outlook is further complicated by political dynamics, particularly with Prime Minister Sanae Takaichi planning a snap election and expressing a preference for low interest rates, which has created some market unease. Economists contend that the BOJ isn't likely to act hastily unless yen depreciation significantly impacts imported inflation.