Economists see Bank of Japan rate at 1.50% in December

A majority of economists in a Reuters poll published Oct. 21 expect the Bank of Japan to raise its policy rate to 1.50% in December, after increases in June and September.

The Reuters poll conducted Oct. 13-19 showed 54 of 78 economists, or nearly 70%, expect a move this quarter, compared with a much smaller share in the prior survey.

Of the 54 respondents who gave a month, about 80% selected December. Only 2% picked the two-day policy meeting ending Oct. 30, according to the poll.

"With rate hikes in the United States and Europe looking likely before year-end, there is a risk that yen selling could accelerate if the BOJ postpones its move until the new year," said Kazutaka Maeda, senior economist at Meiji Yasuda Research Institute.

Separate Reuters polls found the Federal Reserve and European Central Bank are expected to raise borrowing costs in December, while the BOJ is unlikely to move this month.

The poll report said higher energy and import costs, a weaker yen and the war in the Middle East are adding to Japan’s inflation pressure. BOJ board member Junko Koeda said last week the central bank should not be too cautious on rate increases, which are already at 31-year highs.

The main counterweight is timing. "The economy is not overheating to the extent that would warrant consecutive rate hikes, and price developments are also within the BOJ's expected range," said Takeshi Minami, chief economist at Norinchukin Research Institute. Reuters, citing sources it did not identify in the article, said many BOJ officials prefer to review more evidence on how earlier increases have affected financial conditions.

Expectations have also shifted for 2027. Thirty-nine of 65 analysts, or 60%, saw the policy rate at 1.75% by the end of June, unchanged from September’s median forecast. Among 41 respondents to an additional question, the share expecting rates to reach 2.00% or higher rose to 51%, from 40% in September and 36% in August.

Politics may complicate the path. In September, two board members nominated by Prime Minister Sanae Takaichi, who supports looser fiscal policy, opposed the decision to raise rates to 1.25%. Traders interpreted the dissent as a sign of possible pressure from Takaichi’s administration and briefly pushed the yen lower, Reuters said.

Nearly three-quarters of respondents, or 23 of 32, said future dissents at a rate-setting meeting could weigh on the yen. The currency is about 4% stronger than its 2026 low of around 164 per dollar, according to the report.

Japan’s fiscal outlook is part of the same market calculation. Takaichi has said the government aims to keep new bond issuance near 40 trillion yen, or $251 billion, for the fiscal 2027 budget. In the poll, 15 of 23 economists said issuance would stay below that level.

The BOJ’s next two-day policy meeting concludes Oct. 30. The poll shows economists largely expect the central bank to wait until December before raising rates again.

Source: Reuters poll via Channel NewsAsia, Oct. 21, 2026