The share of economists expecting the Bank of Japan to raise interest rates in December jumped to 83% from 35% in just one month. In the previous survey, January of next year had drawn the most votes, meaning the expected timing has been pulled forward by a month.
In a Bloomberg survey released on the 21st, 83% of economists said the BOJ would lift its policy rate, currently at 1.25%, at its December meeting. Some 67% of respondents said the central bank would raise rates every three months, up sharply from 46% in the previous survey. The BOJ delivered its second hike in three months in September, the fastest pace since 1990.
Many economists said the biggest focus of the October meeting would be the BOJ's assessment of whether underlying inflation has reached its 2% target. The central bank has yet to declare that it has met the goal since setting the price stability target in 2013.
Keiji Kanda, senior economist at Daiwa Institute of Research, said in a survey response that if the BOJ judges the target has been reached, the task ahead will be to adjust the degree of monetary easing from the standpoint of firmly anchoring inflation at 2%. Kanda expects hikes in December and in March of next year.
The policy board led by Governor Kazuo Ueda raised the rate to 1.25% about a month ago, entering for the first time the range of the neutral rate, estimated at 1.1% to 2.5% — the theoretical level at which monetary policy neither stimulates nor restrains the economy while keeping prices stable. The median forecast for the terminal rate remained at 1.75% in this survey as well.
Takeshi Yamaguchi, chief economist at Morgan Stanley MUFG Securities, said the BOJ is likely to signal that it views underlying inflation as having reached around 2%. "It will keep rates on hold this month, but it will be a hawkish hold," he said.
Some economists pointed to Prime Minister Sanae Takaichi as a wild card. Takaichi is known as a proponent of monetary easing to support growth. But after U.S. Treasury Secretary Scott Bessent recently urged Japan to withdraw reflationary policies — lowering interest rates and expanding fiscal spending to revive the economy and prices — the prime minister and her cabinet said they were not pursuing reflation. On that basis, about two-thirds of economists assessed that the Takaichi government has softened its stance on BOJ rate increases.
Naomi Muguruma, chief bond strategist at Mitsubishi UFJ Morgan Stanley Securities, said the prime minister's office would not genuinely welcome further BOJ hikes, but added that it appears likely to watch and tacitly accept them for the time being because of relations with the United States.