TOKYO, July 23 (Reuters) – According to a Reuters survey, most economists anticipate the Bank of Japan will increase its benchmark interest rate by at least 25 basis points before the year ends, despite potential influences from global trade disputes and domestic political instability.
The BOJ aims to implement slightly tighter monetary conditions, differing from other central banks that are either considering or already enacting rate reductions. However, this trajectory is growing more ambiguous, particularly following the ruling coalition’s significant loss in Sunday’s parliamentary election.
Among the 72 economists surveyed, 60 (83%) predicted no alterations to interest rates during the BOJ’s upcoming policy meetings on July 30-31 and in September. These forecasts were submitted prior to the election results.
Nevertheless, 54% of respondents, or 39 out of 72 economists, anticipate that borrowing costs will rise to at least 0.75% from the current 0.50% in the next quarter, contrasting with a June poll where only 48% expected a rate increase. The previous survey had fewer participants.
“After 2026, a potential slowdown in price increases might become evident, and the effects of U.S. President Donald Trump’s tariffs could intensify, making autumn 2025…the final opportunity for an interest rate hike in the near future,” stated Takeshi Minami, chief economist at Norinchukin Research Institute.
The July survey forecasts core consumer inflation, excluding volatile fresh food but including fuel costs, to reach 2.6% in the current fiscal year ending March 2026, before decreasing to 1.7% in fiscal 2026.
Interest rate futures currently price in approximately 14 basis points more tightening from the BOJ by year-end.
While BOJ Governor Kazuo Ueda is expected to delay rate hikes to evaluate the economic impact of U.S. tariffs, there remains a possibility of a rate increase this year if Japan reaches an agreement to manage reciprocal tariffs slightly above the current standard rate of 10%, noted Kazutaka Maeda, economist at Meiji Yasuda Research Institute.
Trump recently announced a trade agreement with Tokyo, claiming it would lead to Japan investing $550 billion into the United States and imposing a 15% tariff on imports from the Asian country.
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BOJ to hike rates this year despite uncertainties, economists predict: Reuters poll
TOKYO, July 23 (Reuters) – The Bank of Japan will raise its key interest rate by at least 25 basis points by year-end, a majority of economists said in a Reuters poll, although that could be swayed by global trade tensions and domestic political uncertainty.
The BOJ is seeking to push for slightly tighter monetary conditions, contrasting with its peers who are either tilting for or already proceeding with rate cuts. But the path is becoming increasingly uncertain, especially after the ruling coalition ‘s bruising defeat in Sunday ‘s parliamentary election.
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An 83% majority of economists, 60 of 72, forecast no change to interest rates at the BOJ ‘s next two policy meetings on July 30-31 and in September. Respondents in the July 11-22 survey provided their interest rate forecasts before Sunday ‘s election.
However, 54%, 39 of 72, expect borrowing costs to increase to at least 0.75% from 0.50% next quarter, the survey showed, the reverse of a June poll in which only 48% expected a rate hike. There were fewer respondents in the previous poll.
“After 2026, there is a possibility a slowdown in prices will become apparent, and the impact of U.S. President Donald Trump ‘s tariffs may also intensify, making autumn 2025…the last chance for an interest rate hike in the near term,” said Takeshi Minami, chief economist at Norinchukin Research Institute.
Economists in the July poll expect core consumer inflation, which excludes volatile fresh food but includes fuel costs, to reach 2.6% in the current fiscal year ending in March 2026 before slowing to 1.7% in fiscal 2026.
Interest rate futures are only pricing in about 14 basis points more of tightening from the BOJ by year-end.
While BOJ Governor Kazuo Ueda is likely to hold off raising rates to assess the economic impact from U.S. tariffs, there is a possibility of a rate hike this year if Japan strikes a deal to contain reciprocal tariffs to slightly above the current universal rate of 10%, said Kazutaka Maeda, economist at Meiji Yasuda Research Institute.
Trump on Tuesday announced a trade deal with Tokyo that he said would result in Japan investing $550 billion into the United States and a 15% tariff on imports from the Asian country.
(For other stories from the Reuters global economic poll)
Reporting by Satoshi Sugiyama; Polling by Susobhan Sarkar; Editing by Jonathan Cable, Ross Finley and Sam Holmes