The Bank of Japan is likely to raise its key interest rate by at least 25 basis points in the final quarter of this year, according to a new Reuters poll of economists. The survey, conducted between September 2 and 9, showed that a majority of analysts expect a rate hike during the October-to-December period, although support for that view has eased slightly compared to last month when nearly two-thirds of respondents anticipated such a move.

The BOJ, which ended negative interest rates earlier this year, has been gradually shifting toward tighter monetary policy in response to inflationary pressures and rising wage growth. Economists in the poll said the central bank is intent on continuing a cautious path of normalization after years of ultra-loose policy. They added that even a modest hike would signal further steps toward aligning Japan’s policy stance with other advanced economies that tightened earlier.

Interestingly, expectations for the U.S. Federal Reserve to cut interest rates as early as next week have not dampened forecasts for Japanese tightening. An overwhelming 93% of analysts who answered an additional question in the survey said a Fed rate cut would not alter the BOJ’s course. That suggests the central bank’s decisions are being guided primarily by domestic economic conditions rather than global monetary trends.

Japan’s inflation has remained above the BOJ’s 2% target for more than two years, supported by higher import costs, robust corporate earnings, and improving wages. While policymakers remain wary of prematurely tightening, the persistence of these factors has increased confidence that the country may be emerging from decades of deflationary stagnation. A measured rate hike later this year would reinforce that outlook.

Still, some analysts caution that the BOJ will act carefully to avoid destabilizing growth or financial markets. The yen has already been under pressure against the U.S. dollar, and sharper moves in policy could trigger volatility. For now, however, the consensus view is that Japan will take another step toward monetary normalization in the fourth quarter, reflecting both confidence in its recovery and determination to manage inflation sustainably.

Source: Reuters.