Economists predict: Bank of Japan most likely to hike rates in July, possibly as early as May
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Economists predict: Bank of Japan most likely to hike rates in July, possibly as early as May
Nearly 90% of economists predict Trump will have a negative impact on Japan's economy, posing a major obstacle to the Bank of Japan's rate hikes.
Navigating Web3 tides with focused insightsBy Yang Dapang
According to a foreign media survey, the Bank of Japan is expected to keep its key interest rate unchanged at the meeting on March 19, with more than two-thirds of economists forecasting a 25 basis point rate hike to 0.75% in the third quarter—most likely in July.
The survey also found that 90% of economists expect U.S. President Trump's tariff policies to have a negative or slightly negative impact on the Japanese economy.
The results indicate that amid chaotic shifts in U.S. tariff policy shaking financial markets and reigniting concerns over a global economic slowdown, the Bank of Japan remains an outlier globally in pursuing monetary tightening.
In the survey conducted from March 4 to 11, all but one of the 62 economists predicted rates would remain unchanged at the March 18–19 meeting; meanwhile, within a smaller group (18 out of 61), there was an expectation of at least one 25 basis point rate increase to 0.75% during the April–June quarter—similar to last month’s survey.
About 70% of respondents (40 out of 57) forecast a rate rise to 0.75% in the third quarter, slightly higher than the over-65% expectation seen in February.
Among a smaller sample of 37 economists who predicted specific months for a rate hike, 70% (26 people) chose July, up from a previous 59%; 14% (5 people) selected June, three picked April–May, and one person each chose March, September, or October.
Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute, said, “The urgency for a rate hike has diminished partly because yen depreciation has paused and upward pressure on import prices has eased. We expect the Bank of Japan’s next rate hike to occur in July, when statistical data will confirm the outcomes of wage negotiations for the current fiscal year.”
Markets anticipate a 25 basis point rate hike by Japan around September or October, with about a 25% probability of another subsequent hike, leading to a cumulative increase of 31.4 basis points by December.
Earlier, sources indicated that rising inflationary pressures from higher wages and persistently increasing food costs might prompt Bank of Japan policymakers to discuss the possibility of another rate hike as early as May.
Sources noted that whether the Bank of Japan acts in May or later this year will depend on the outlook for prices and the impact of Trump’s policies on financial markets.
This Wednesday, many of Japan’s major companies granted substantial pay increases demanded by labor unions for the third consecutive year, providing the Bank of Japan with greater room to further raise interest rates.
The survey showed the median forecast for year-end interest rates remained at 0.75%, unchanged from February, while the median forecast for the end of March 2026 stood at 1.00%, also unchanged.
Kento Minami, economist at Daiwa Securities, said the Bank of Japan has no reason to rush into rate adjustments amid market instability.
In the foreign media’s latest survey, approximately 90% of economists (28 out of 31) said Trump’s announced tariff policies so far will negatively or slightly negatively affect the Japanese economy, consistent with the 94% share recorded in the December survey last year.
Harumi Taguchi, chief economist at S&P Global Market Intelligence, said: “Beyond the direct impact on exports, strong future uncertainty is making it difficult for businesses to plan production and investment. Risks of downward pressure on capital investment are rising.”
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