Bank of Japan Expected to Hike Interest Rates Again This Quarter, Economists Predict
The Bank of Japan is widely anticipated to raise interest rates once more before the end of the year, according to a recent Reuters poll of economists. This potential move signals a continued shift away from the nation’s long-held ultra-loose monetary policy, reflecting growing confidence in sustained inflation and economic recovery.
The survey, conducted among a broad range of financial institutions, reveals a strong consensus that the BOJ will adjust its monetary stance in the fourth quarter of 2024. While the exact timing and magnitude of the increase remain subject to debate, the prevailing sentiment points towards further tightening.
Inflation and Economic Recovery Fuel Expectations
For years, Japan has battled deflation and sluggish economic growth. However, recent data indicates a notable change in the economic landscape. Rising inflation, driven by global commodity prices and increased domestic demand, has prompted the BOJ to reassess its ultra-accommodative policies.
One analyst noted, “The BOJ has signaled its intention to move towards a more normalized monetary policy, and the current economic conditions support that transition.” The Reuters poll confirms this assessment, with a majority of respondents believing that the BOJ’s primary goal is now to manage inflation while sustaining economic momentum.
Timing and Magnitude of the Rate Hike
The poll did not yield a unanimous agreement on the precise timing of the next rate increase. However, the majority of economists predict a move will occur sometime between October and December.
The expected magnitude of the increase also varied. Some economists anticipate a modest 0.10% increase, while others foresee a more substantial adjustment. The BOJ’s decision will likely depend on incoming economic data, including inflation figures, wage growth, and global economic developments.
Implications for the Japanese Economy and Global Markets
A further interest rate hike by the BOJ would have significant implications for the Japanese economy and global financial markets. Higher interest rates could lead to increased borrowing costs for businesses and consumers, potentially dampening economic activity. However, they could also help to curb inflation and strengthen the Japanese yen.
“A stronger yen could benefit Japanese importers and consumers, but it could also hurt Japanese exporters,” a senior official stated. The impact on global markets is also likely to be felt, as the BOJ’s monetary policy decisions have a ripple effect on international capital flows and exchange rates.
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The Reuters poll underscores the growing expectation that the Bank of Japan is firmly on a path towards normalizing its monetary policy, a move that will reshape the economic landscape of Japan and beyond.
