Japan's BOJ Likely to Raise Rates This Quarter, With April or June Still Under Discussion

Huo Xing Finance reports that, according to a Reuters survey, nearly two-thirds of economists predict the Bank of Japan will raise its benchmark interest rate to 1% by the end of June. Amid uncertainties stemming from the war in Iran, the market views the likelihood of an April rate hike as roughly equal to that of a June hike. Economists continue to broadly expect the Bank of Japan to tighten policy again this quarter—a view that has remained largely unchanged since the U.S. and Israel launched military action against Iran on February 28. If anything, the conflict has intensified market concerns over rising energy prices, resurgent inflationary pressures, and further yen depreciation, thereby strengthening hawkish expectations for rate hikes. In the survey conducted between April 7 and 14, 46 out of 71 economists (65%) forecast that the policy rate will reach 1% by end-June, up from 60% in March and 58% in February. Among the 40 economists who provided specific timing estimates, 38% chose April and 35% chose June. Last month’s survey showed the highest support for a June hike at 32%, followed by July at 30% and April at 27%. Looking beyond June, the median forecast indicates that the Bank of Japan will raise borrowing costs to 1.25% in the fourth quarter, slightly earlier than previously expected. The median forecast also suggests a further 25-basis-point hike to 1.50% in the third quarter of 2027, with rates held steady through year-end—though a few institutions anticipate rates rising as high as 1.75%. (Jinshi)