Economic adviser Takuji Aida predicts the Bank of Japan will raise its policy interest rate to 1.25% during the September 17-18 meeting. This would represent a 25 basis point increase from the current 1% rate, marking the highest policy rate in decades for the country.
Aida, who is also the chief Japan economist at Crédit Agricole, forecasts a series of quarterly rate hikes from September through January 2027, followed by semiannual adjustments. This shift in stance is driven by the weakening yen, rising service prices, and increasing inflation risks.
International pressure is also contributing to the factor. US Treasury Secretary Scott Bessent has called for decisive action by the Bank of Japan to stabilize the yen.
The Japanese parliament is scheduled to discuss the suspension of an 8% food item levy for two years during an extraordinary session in early October. If approved, this measure is intended to offset the impact of higher interest rates on consumers.