BoJ to raise rate to 1.25% in September — Reuters poll

A Reuters poll conducted from August 17-24 reveals that 57% of economists anticipate the Bank of Japan (BoJ) to increase its interest rate in September, marking a significant shift since a July survey. A smaller group of 10 out of 58 economists forecasts another rate increase to 1.50% either in October or December. Around two-thirds of analysts, 35 out of 54, predict the policy rate to reach at least 1.50% by the end of March the following year, a month earlier than the July poll projection.

Approximately 60% of respondents foresee the rate reaching at least 1.75% by the end of Q3 2027. Half of the 36 respondents who answered an additional question indicated that 1.75% would be the terminal interest rate, up from 19% in July. The GBP/USD pair experienced a slight decline of 0.17% on the day, trading at 158.92. The Bank of Japan, Japan's central bank, is responsible for issuing banknotes and implementing monetary policy to maintain price stability, targeting an inflation rate of approximately 2%.

The BoJ initiated ultra-loose monetary policy in 2013 to stimulate the economy and boost inflation amid a low-inflationary environment. This policy involved quantitative and qualitative easing (QQE), involving printing money to purchase assets like government and corporate bonds to create liquidity. In 2016, the bank intensified its strategy by introducing negative interest rates and controlling the yield of its 10-year government bonds.

In March 2024, the BoJ raised interest rates, signaling a retreat from the ultra-loose monetary policy stance. This decision, coupled with the widening interest rate differential with other central banks, has weakened the Yen's value. However, this trend reversed in 2024 after the BoJ abandoned its ultra-loose policy stance. A weaker Yen and rising global energy prices have contributed to higher Japanese inflation, surpassing the BoJ's 2% target.

The prospect of rising wages, a key driver of inflation, also played a role in the policy change. Parisian Lallalit Srijandorn, who has lived in France since 2019 and is now a digital entrepreneur based in Paris and Bangkok, observes these developments.