By Satoshi Sugiyama
TOKYO (Reuters) – The Bank of Japan will raise interest rates again in 2024, according to two-thirds of economists polled by Reuters, but there was no clear consensus on when exactly the move would come.
Last month the central bank ended negative rates in a landmark shift away from its super-easy monetary policy, raising rates for the first time in 17 years to a 0.0-0.1% range.
The prevailing view among traders that the BOJ will refrain from aggressive hikes in the near-term so as to support a fragile economic recovery, which has contributed to the yen’s slide against the U.S. dollar, was backed up by the poll results.
None of the economists polled April 10-17 predicted the next rate hike would come before the end of June, but just over a third of them, or 21 of 61, anticipated borrowing costs would rise to either 0.20% or 0.25% in the July-September quarter.
Chiyuki Takamatsu, chief economist at Fukoku Mutual Life Insurance, said the BOJ will be inclined to raise rates in July as consumers’ price expectations increase.
“Along with a foreseeable 5%-plus wage hike in large companies, the BOJ will have more confidence for the achievement of its price target,” Takamatsu said.
The BOJ targets an inflation rate of 2% but core inflation, which excludes fresh food items, was last reported at 2.6% in March and is forecast to be above target for at least a year, giving the central bank room to hike.
Just under one-third of economists, or 17 of 55, forecast the BOJ will raise rates to either 0.20% or 0.25% in the October-December quarter, the survey showed.
Five of the economists who expected a 0.25% rate in the third quarter – ING Financial Markets, JP Morgan, Meiji Yasuda Research Institute, Fukoku Mutual Life Insurance and T&D Asset Management – also foresaw the policy rate being lifted to 0.50% in the three months to December.
Median forecasts put the upper end of the target range for the overnight call rate, currently 0.10%, at 0.25% in the fourth quarter and staying there until late 2025 by which time it would be lifted to 0.50%.
Of a smaller sample of 36 economists who provided a specific forecast for which month the BOJ would next hike rates in, October was the top pick with 36%, followed by “2025 or later” with 31%, and 19% for July.
“The BOJ is likely to be able to confirm a further increase in wages and their transfer to service prices over the summer and autumn, increasing the likelihood of stable 2% price increases being achieved,” said Moe Nakahama, an economist at Itochu Economic Research Institute.
Receding expectations of a near-term U.S. interest rate cut have pushed the yen to a 34-year low – over 154 per dollar on Tuesday – keeping markets on alert for possible intervention by Japan to prop up the currency.
Nearly all economists, or 91%, said Japanese authorities will step in at some level to stop the yen from weakening further.
Asked at which level, 76% or 16 of 21 said they expected action if the yen slumped to 155 against the dollar. Two chose 156, two chose 158, and one said 157.
(For other stories from the Reuters global economic poll:)
(Reporting by Satoshi Sugiyama; Polling by Anant Chandak, Susobhan Sarkar and Devayani Sathyan; Editing by Hugh Lawson)
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