Bank of Japan's Interest Rate Outlook: No Immediate Hikes Expected

BOJ's Current Rate Stance

A recent Reuters poll reveals that the Bank of Japan (BOJ) will likely maintain its interest rate at 0.25% through December 2024. This decision comes despite nearly 90% of economists anticipating a rate hike by the end of March 2025.

Economic Context and Prime Minister's Influence

With global central banks moving toward rate cuts, the BOJ faces challenges in policy normalization amid uncertainty about the new political leadership's monetary preferences. Prime Minister Shigeru Ishiba, who took office on October 1, emphasized that the Japanese economy is not ready for further rate hikes, a shift from his previous support for the BOJ's gradual unwinding of extreme monetary stimulus.

Forecasts for Future Rate Changes

In the Oct. 3-11 poll of 49 economists, 25 predicted that the BOJ would hold its rate steady until the end of the year. However, 87% of respondents expect a rise to 0.50% by March 2025, contingent on wage increases and the U.S. economy's performance.

Mari Iwashita, chief market economist at Daiwa Securities, indicated that the BOJ's decision may be postponed until March, as it assesses the implications of the U.S. administration's policies and annual wage negotiations.

Conclusion

Japan's economy is showing signs of resilience, with a reported annualized growth of 2.9% in Q2 2024. However, economists urge caution regarding Ishiba's economic policy, with 21 out of 29 stating it is too early to evaluate its effectiveness. The BOJ's approach remains crucial as it navigates domestic and international economic pressures.