By Satoshi Sugiyama
TOKYO, Feb 19 (Reuters) – The Bank of Japan is likely to raise its key interest rate to 1% by end-June, according to a majority of economists polled by Reuters, with some expecting a move as soon as April because of mounting concerns about rising inflation and a weak yen.
In the first survey of forecasters since Prime Minister Sanae Takaichi swept to a landslide election win on February 8 in the best-ever result for her Liberal Democratic Party, the consensus view for the next hike has shifted from end-September.
In December, the BOJ raised rates to a 30-year high of 0.75% and signalled its readiness to keep hiking, as many of its global peers are near the end of rate-cutting cycles.
Markets are on alert to gauge whether Takaichi will renew her calls for the BOJ to keep interest rates low.
In the February 10-18 poll, all 76 economists said the BOJ would hold rates steady at its March meeting.
However, 58% of them, 43 of 74, expected the policy rate to reach 1% by the end of June, up from a little over one-third in January. Of the 44 economists who specified a month for the next hike, June was the top pick at 36% while 20% chose April. Another 34% picked July.
“The BOJ is in a hawkish mood and it’s possible that the next rate hike will come as soon as April,” said Marcel Thieliant, head of Asia-Pacific at Capital Economics, although he said June was more likely.
Kento Minami, senior economist at Daiwa Securities, said the BOJ would proceed at a relatively brisk pace with further increases, mindful of upside inflation risks from expansionary fiscal policy and the yen’s depreciation.
After sliding close to the psychologically important 160 yen per U.S. dollar in January, the yen gained nearly 3% last week in its largest rise since November 2024.
That came partly on speculation Takaichi’s victory would strengthen her hand in rejecting steeper tax cuts and broader outlays pushed by opposition parties. Still, analysts remain wary of the fiscal implications of Takaichi’s agenda.
In the poll, over 57% of economists who answered an extra question, 19 of 33, said they were “highly” or “somewhat” concerned a proposed two-year suspension of the consumption tax on food and beverages would strain public finances.
“Fully ending the consumption tax reduction after two years would be difficult, leaving fiscal risks,” said Atsushi Takeda, chief economist at Itochu Research Institute.
To counter further yen weakness, two-thirds of respondents, 20 of 29, said they anticipated authorities to intervene again in the currency market. Among them, 40% said the 160 yen per dollar mark was the most likely trigger.
Separately, around 52%, 16 of 31, said the pay increase in this year’s wage negotiations would not exceed last year’s 5.25%. That was down from 68% in December and 81% in November.
The median of 29 economists who offered their view on wages expects growth of 5.2% versus 5.0% in December and 4.9% in November.
(For other stories from the Reuters global economic poll)
(Reporting by Satoshi Sugiyama; Polling by Susobhan Sarkar and Vijayalakshmi Srinivasan; Editing by Ross Finley and Shri Navaratnam)
