Bank of Japan Expected to Raise Rates Again by December, Reuters Poll Shows

The Bank of Japan (BoJ) is expected to raise its benchmark interest rate again by December 2025, according to a majority of economists surveyed in a recent Reuters poll. The survey, conducted in early October, indicates that a growing consensus among market participants sees the central bank continuing its gradual exit from years of ultra-loose monetary policy.

Poll Details and Timing

The Reuters poll, which gathered responses from over 30 economists between October 1 and October 8, found that more than 70% of respondents expect the BoJ to raise its short-term policy rate from the current 0.25% to at least 0.50% by the end of the year. A smaller but significant portion of economists forecast the move could come as early as the October 30-31 policy meeting, though the majority pointed to the December 18-19 meeting as the more likely timing.

Drivers Behind the Expected Move

Several factors underpin the expectation for another rate hike. Japan’s core consumer inflation has remained above the BoJ’s 2% target for well over a year, driven by rising import costs and a tight labor market. The central bank has signaled its willingness to normalize policy if inflation and wage growth prove sustainable. Recent comments from BoJ Governor Kazuo Ueda have reinforced this view, stating that the bank will continue to adjust the degree of monetary support if the economy and prices move in line with forecasts.

Market and Economic Implications

A rate hike in December would mark the BoJ’s third increase in 2025, following moves in March and July. Such a trajectory would further differentiate Japan’s monetary policy from the easing cycles now underway in the United States and Europe, where central banks are cutting rates. This divergence could strengthen the Japanese yen against the dollar and euro, impacting export competitiveness and import costs. For Japanese households, higher rates may increase mortgage costs but also boost savings yields, while for the government, they raise the cost of servicing Japan’s large public debt.

Conclusion

The Reuters poll underscores a clear market expectation that the Bank of Japan will continue its monetary policy normalization through another rate hike by December 2025. While the exact timing remains uncertain, the direction is increasingly clear, with implications for currency markets, Japanese bonds, and the broader economy. The final decision will depend on incoming economic data, particularly wage negotiations and inflation trends, in the months ahead.

FAQs

Q1: When is the Bank of Japan expected to raise rates again?
According to a Reuters poll of economists, the most likely timeframe is the December 18-19, 2025 policy meeting, though some expect a move as early as late October.

Q2: What is the current BoJ policy rate?
The Bank of Japan’s short-term policy rate currently stands at 0.25%, following rate hikes in March and July 2025.

Q3: Why is the BoJ raising rates when other central banks are cutting?
Japan’s inflation has remained persistently above the 2% target, and the BoJ is normalizing policy after years of ultra-loose measures. In contrast, the US and European central banks are cutting rates as inflation recedes.