Summary:
BOJ expected to hold rates steady through March
July seen as most likely timing for next hike
76% expect rates at 1% or higher by September
Median terminal rate forecast lifted to 1.5%
Political backdrop adds caution to BOJ timing
The Bank of Japan is widely expected to keep its key policy rate on hold through March, with economists seeing the next move coming mid-year and policy tightening extending further into 2026, according to a Reuters poll.
Of the 67 economists surveyed, 97% expect no change at the January and March meetings, reflecting a broad consensus that the BOJ will move cautiously after lifting rates to a 30-year high of 0.75% in December. The central bank waited 11 months between its January 2025 hike and the December move, reinforcing expectations of a measured pace.
Looking ahead, 76% of respondents expect the policy rate to reach 1% or higher by the end of September, up from 69% in the previous poll, with July seen as the most likely timing for the next increase. Among those who specified a month, 43% picked July, while smaller shares pointed to June, April or later in the year. The bias toward summer reflects a desire by policymakers to assess the economic impact of the latest hike and align decisions with the BOJ’s Outlook Report.
Beyond that, expectations for the eventual peak in rates have shifted higher. The median forecast for the terminal rate is now 1.5%, up from 1.0% in a poll conducted nearly a year ago, though estimates still span a wide range between 1% and 2%. While most economists see only one rate increase in 2026, nearly a third expect two.
The policy outlook is complicated by politics. Prime Minister Sanae Takaichi, who plans to call a snap general election, has stressed her preference for low interest rates and rattled markets by asserting influence over monetary direction. Economists say the BOJ is unlikely to rush unless yen weakness feeds meaningfully into imported inflation.
