By Satoshi Sugiyama
TOKYO (Reuters) – The Bank of Japan will raise interest rates again by year-end, according to more than half the economists in a Reuters poll published on Wednesday, with those who had a view on which month leaning towards a December increase.
The findings reflect analysts’ conviction the BOJ is undeterred from gradually retreating from decades of huge monetary stimulus even as its global peers, including the U.S. Federal Reserve, tilt toward interest rate cuts.
In the August 13-19 poll, 57% of economists, or 31 of 54, said the BOJ would raise borrowing costs again by the end of the year. The median prediction for the rate at end-year was 25 basis points higher, at 0.50%.
Among a smaller sample of 22 economists who predicted higher rates by year-end and also provided a forecast for a specific month when the BOJ will next change them, about two-thirds, 14, said December and about one-third, eight, said October.
“The current policy rate is extremely accommodative,” said Atsushi Takeda, chief economist at Itochu Research Institute. “The BOJ will continue to raise interest rates toward the neutral rate as long as the 2% price stability target is expected to be achieved.”
The central bank surprised many market participants in July by raising base borrowing costs to 0.25% from a range of 0%-0.1%, just four months after abandoning negative rates.
At the time, BOJ Governor Kazuo Ueda signalled the likelihood of steady rate hikes in coming years.
But his message came just days before turmoil in financial markets had the battered yen soaring against the U.S. dollar and the Tokyo stock market plunging by its biggest amount in 37 years. Markets have since stabilised.
Although BOJ deputy governor Shinichi Uchida dialled back Ueda’s hawkish comments by assuring the bank will not bring borrowing costs up while markets are unstable, economists say the BOJ’s overall stance has not changed.
“It is too early to assume that the market turmoil after the July additional rate hike has changed the path the BOJ envisions for rate hikes,” said Kazutaka Maeda, an economist at Meiji Yasuda Research Institute.
Japan’s economy expanded by a much faster-than-expected 3.1% annualised rate in the second quarter, rebounding from a slump at the start of the year thanks to a strong rise in consumption, government data showed last week.
Growth was predicted at 0.6% this fiscal year ending March 2025 and 1.1% in the next, the poll showed. Inflation will average 2.4% this fiscal year and 1.9% in the next.
(Other stories from the Reuters global economic poll)
(Reporting by Satoshi Sugiyama; Polling by Veronica Khongwir, Devayani Sathyan; Editing by Ross Finley and Sam Holmes)
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