By Satoshi Sugiyama
TOKYO (Reuters) -The Bank of Japan will raise its key interest rate by at least 25 basis points in the October-December quarter, a majority of economists said in a Reuters poll, down from nearly two-thirds a month ago.
Even as markets expect the U.S. Federal Reserve to cut interest rates next week, 93% of analysts in the September 2-9 poll who answered an extra question said that would not delay the BOJ’s push for slightly tighter monetary conditions.
All but three of 68 economists surveyed forecast no change to interest rates at the BOJ’s upcoming September 18-19 policy meeting. The Fed meets September 16-17.
However, 55%, or 36 of 66, expected the central bank to raise borrowing costs to at least 0.75% from 0.50% next quarter, a decrease from 63% in last month’s poll but in line with July’s 54%.
“The BOJ will likely wish to adjust its current monetary easing stance, given the risks of accelerating yen depreciation and asset bubbles,” said Atsushi Takeda, chief economist at Itochu Economic Research Institute.
“Should the impact of (U.S. President Donald) Trump’s tariffs become clear from trade data and the ‘tankan’ survey, an October rate hike becomes feasible.”
The BOJ could also hike rates in October if the “tankan” survey and the branch managers’ meetings show wages and inflation would rise gradually even with U.S. tariffs, said Yusuke Matsuo, senior market economist at Mizuho Securities.
A median prediction for the year-end rate was 0.75%, unchanged from last month’s poll. Financial markets are pricing in an over 50% chance of a rate hike by year-end.
BOJ Deputy Governor Ryozo Himino said last week the bank should keep raising interest rates but warned global economic uncertainty remains high, suggesting it was in no rush to hike still-low borrowing costs.
Additionally, the central bank could push back hiking the interest rate depending on who will replace outgoing Prime Minister Shigeru Ishiba.
The likelihood of further rate hikes would “significantly diminish” should Sanae Takaichi, a fiscal dove, become the next prime minister, said Masato Koike, senior economist at Sompo Institute Plus.
Over three-quarters of economists who answered an extra question, 22 of 29, said they did not expect the rate of pay increase in next year’s labour-management negotiations to exceed this year’s 5.25%. The median of 26 economists who offered their view on the rate was 4.80%.
“The deterioration in the global and U.S. economies caused by U.S. tariff policies is expected to weigh on Japanese corporate profits and economic outlook,” said Masamichi Adachi, economist at UBS Securities.
“Nevertheless, it is anticipated that growth will remain around 5%, allowing the BOJ to conclude that the ‘virtuous cycle’ of wages and prices is being sustained.”
(Other stories from the September Reuters global economic poll)
(Reporting by Satoshi Sugiyama; Polling by Devayani Sathyan and Vijayalakshmi Srinivasan in BENGALURU; Editing by Jonathan Cable and Sam Holmes)
