TOKYO, Aug 21 (Reuters) – A significant majority of economists surveyed by Reuters anticipate that the Bank of Japan will raise its policy rate by at least 25 basis points before the end of the year, with expectations growing compared to a month earlier. In the latest poll conducted between August 12 and 19, nearly two-thirds of respondents expect tightening in the fourth quarter, up from slightly over half previously. n nDespite recent signs of softness in the U.S. labor market fueling speculation of a Federal Reserve rate cut, 70% of analysts believe this will not deter Japan’s central bank from moving toward a firmer monetary stance. n nAlthough inflation has remained above the BOJ’s 2% goal for over three years, prompting calls for higher borrowing costs, policymakers have remained cautious, partly due to uncertainty around U.S. trade policies and their potential impact on growth. n nOut of 73 economists, 67—representing 92%—forecast no change at the upcoming mid-September policy meeting. However, 63% of 71 respondents expect the base rate to rise from its current 0.50% to at least 0.75% in the final quarter of the year, an increase from 54% in the prior survey. n nAmong the 40 economists who specified a month, October emerged as the most likely timing, cited by 38%. January 2025 followed at 30%, while December received 18% of responses. n nHiroshi Namioka, chief strategist at T&D Asset Management, noted that October would allow the BOJ to evaluate both U.S. monetary developments and domestic political shifts before acting. He added that the release of the quarterly outlook report and the post-branch managers’ meeting timing would facilitate clearer decision-making. n nMarket pricing continues to reflect expectations of one additional 25-basis-point hike by year-end. n nOn trade, 22 out of 29 economists who responded to a supplementary question expressed approval—either strong or moderate—of the Japan-U.S. trade agreement. n nMeanwhile, fiscal concerns are rising: 21 of 31 analysts are worried about mounting pressure for increased government spending, especially after opposition parties advocating for lower consumption taxes gained ground in the recent upper house election. n nKyohei Morita, Nomura Securities’ chief economist, warned that such political dynamics could encourage short-term policy decisions, undermining long-term fiscal responsibility. n nJunya Takemoto of Sumitomo Mitsui Banking Corporation believes large-scale fiscal expansion remains unlikely, as the ruling party remains cautious about widening the primary deficit amid rising interest expenses. n nThe poll also revealed no clear preference among economists regarding which potential successor to the prime minister would best advance policies supporting sustained economic growth. n
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BOJ to raise interest rates again in Q4, possibly in October, say economists – Reuters poll
TOKYO, Aug 21 (Reuters) – The Bank of Japan will raise its key interest rate by at least 25 basis points again later this year, according to nearly two-thirds of economists in a Reuters poll, up from just over half a month ago. n nWhile news of recent weakness in the U.S. job market has renewed bets for a Federal Reserve interest rate cut next month, 70% of analysts in the poll said that alone won ‘t delay the Japanese central bank ‘s push for slightly tighter monetary conditions. n nSign up here. n nAlthough the BOJ has been under pressure to raise rates after more than three years of consumer inflation exceeding its 2% target, it has been wary of doing so, partly due to concerns about U.S. tariffs damaging economic growth. n nIn the August 12-19 poll, a 92% majority of economists, 67 of 73, forecast no change to interest rates at the BOJ ‘s next policy meeting in mid-September. n nHowever, 63%, 45 of 71, expect the central bank to raise base borrowing costs to at least 0.75% from 0.50% next quarter, an increase from 54% in last month ‘s poll. n nOf 40 economists who specified a month for when the BOJ will next hike rates, October was the top choice at 38%, followed by 30% for January next year and 18% this December. n n”In October, the BOJ would be able to respond after assessing the direction of U.S. monetary policy and political developments in Japan,” said Hiroshi Namioka, chief strategist at T&D Asset Management. n nThe BOJ could make decisions more easily in October, since its quarterly outlook report will be published that month and the policy meeting will take place after the branch managers ‘ meeting, Namioka said. n nFinancial markets still are pricing in one further quarter-point BOJ interest rate hike by year-end . n nOver three-quarters of economists who answered an extra question, 22 of 29, said they either strongly or somewhat approved of the Japan-U.S. trade deal. n nSeparately, more than two-thirds, 21 of 31, said they were concerned about pressure to expand fiscal spending after opposition parties calling for a reduction in consumption tax made gains in last month ‘s upper house election. n nAlong with the results of last year ‘s lower house election, in which the ruling coalition lost its majority, “it has become easier to make short-sighted policy choices,” said Kyohei Morita, chief economist at Nomura Securities. n n”There is a growing risk that consideration for fiscal sustainability will fall below the level it should be,” he said. n nJunya Takemoto, senior economist at Sumitomo Mitsui Banking Corporation, said extreme fiscal expansion would be unlikely, as the ruling party remains cautious about expanding the primary deficit with rising interest rates. n nThere was no clear consensus among respondents on which potential contenders for the next prime minister would deliver economic policy with the best chance of stimulating mid- to long-term growth. n n(Other stories from the Reuters global economic poll) n nReporting by Satoshi Sugiyama; Polling by Vijayalakshmi Srinivasan and Devayani Sathyan in BENGALURU; Editing by Ross Finley and Sam Holmes