The poll firms up December as the likely window for the BOJ’s next move, which should limit yen sensitivity to the 30 October meeting but raises the stakes around the December decision. The bigger currency risk may be the vote itself: with the yen only modestly above its 2026 low, a repeat of September’s dissent from government-nominated board members could be read as political resistance to tightening and trigger fresh selling. Rising energy and import costs tied to the Middle East war keep oil a direct input into Japan’s inflation outlook, so a further jump in crude would likely harden the case for hikes. For JGBs, the shift toward a 2% or higher terminal rate, combined with fiscal concerns, points to continued pressure on yields.
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Economists now broadly expect the BOJ to keep raising rates every quarter, with the main risk to the yen coming not from the timing of the next move but from who votes against it.
Summary:
- 69% of economists (54 of 78) in an October 13 to 19 Reuters poll expect the BOJ to lift its policy rate to 1.50% this quarter, up from 36% in September
- Of those naming a month, about 80% picked December; only 2% chose the meeting ending 30 October
- 60% expect the rate to reach 1.75% by end-June 2027; 51% now see a terminal rate of 2.00% or higher, up from 40% in September
- Nearly three-quarters said further dissent at the next hike could weigh on the yen, which is only about 4% above its 2026 low near 164 per dollar
- Nearly two-thirds expect the government to keep new bond issuance below 40 trillion yen for fiscal 2027
The Bank of Japan is expected to raise its benchmark interest rate to 1.50% in December, according to a Reuters poll of economists, extending a pattern of quarterly increases after hikes in June and September.
Of 78 economists surveyed between 13 and 19 October, 54, or nearly 70%, expected a move to 1.50% this quarter, almost double the share in the September poll. About 80% of those naming a month chose December, while just 2% expected action at the BOJ’s two-day meeting ending on 30 October.
Higher energy and import costs, made worse by a weak yen and the war in the Middle East, are adding to inflation pressure, the poll found. A period of relative stability in the yen, which faced heavy selling for much of the year and prompted intervention from both Japanese authorities and the US Treasury, also supports the case for a December move. Board member Junko Koeda said last week the BOJ should not become overly cautious about raising rates, now at their highest in 31 years, given significant upside risks to inflation.
Not every economist sees the need for speed. Some argued the economy is not overheating enough to justify back-to-back hikes and that prices remain within the BOJ’s expected range. Sources have told Reuters that many BOJ officials want more data on how earlier increases have affected financial conditions.
Expectations for the peak rate have shifted higher. Sixty per cent of respondents saw the policy rate at 1.75% by the end of June next year, while the share expecting it to reach 2.00% or more rose to 51% from 40% in September.
Politics remains a risk for the yen. In September, two board members nominated by Prime Minister Sanae Takaichi, who favour looser fiscal policy, voted against raising rates to 1.25%. Nearly three-quarters of economists said further dissent at the next hike could weigh on the yen, which sits only about 4% above its 2026 low near 164 per dollar.
On fiscal policy, nearly two-thirds of respondents expected the government to keep new bond issuance below 40 trillion yen, about $250 billion, for fiscal 2027, after Takaichi said she aims to hold issuance around that level.
With the Federal Reserve and the European Central Bank also expected to raise rates in December, according to separate Reuters polls, the BOJ’s next decision will be judged as much on the vote split as on the move itself.
A personal note: I write article after article on the Bank of Japan outlook and every shift in economists’ views, but if I had simply written “a quarterly pace of rate rises” and left it at that, I reckon I’d have been 99% correct.
Bank of Japan Governor Ueda
This article was written by Eamonn Sheridan at investinglive.com.