BOJ will Keep Rates this Month and Raise them to 0.75% in Q3, Probably in July

According to a Reuters survey released on Thursday, most analysts believe the Bank of Japan will raise interest rates just once this year, most likely to 0.75% in the third quarter.

Additionally, according to the study, analysts’ consensus forecast for this year’s rate of wage growth is 5%, which is around the 33-year high from last year and suggests that the BOJ will keep hiking interest rates.

As concerns grow about U.S. President Donald Trump’s tariff policy, other major central banks drop rates to support their economies, leaving the BOJ as a rare global outlier advocating for higher rates, although from a very low level.

Only 19 of the 61 economists surveyed in the February 12–18 poll predicted that borrowing rates would increase by at least 25 basis points to 0.75% in the upcoming quarter, while all 61 economists predicted that borrowing costs would stay the same in the March 18–19 meeting. 38 out of 58 respondents, or more than 65%, said that rates will rise to 0.75% in July or September.

Through the end of the year, the Japanese swap market is pricing in a further 35 basis points of rate rises, or a 69% possibility of two more 25-basis-point increases.

“It will be necessary (for the BOJ) to examine the impact of the January interest rate hike and confirm the rate of pay increases in this year’s wage talks and the extent to which they have spread to small and medium-sized firms,” stated Junki Iwahashi, senior economist at Sumitomo Mitsui Trust Bank.

In a smaller sample of 39 analysts who projected a raise for a specific month, 59%, or 23, chose July. Five people picked April and September, while another 15%, or six people, picked June.

The survey revealed that the median forecast for the end-year rate was 0.75%, and the end-March 2026 rate was 1.00%. Convinced that Japan was making headway toward sustaining its 2.0% inflation target, the BOJ increased its short-term interest rate in January from 0.25% to 0.50%, the highest since the global financial crisis in 2008.

On Wednesday, a member of the BOJ board stated that the central bank has to raise borrowing costs further because maintaining them at their present low levels might lead to excessive risk-taking and a rise in inflation.

According to Masato Koike, senior economist at Sompo Institute Plus, July is a plausible date for the subsequent rate rise because it is six months after the January meeting and would also come after the Upper House election.

Separately, a poll conducted last month found that the median of 28 experts who expressed opinions on the rate of pay rises during this year’s spring labor-management discussions was 5%, up from 4.75%. The poll median for pay rises reached 5% for the first time.

Kyohei Morita, chief economist of Nomura Securities, stated that “high-level wage increases will be made to retain workers due to a shortage of manpower and prolonged inflation.”

Morita did, however, draw attention to the need to consider whether wage increases are sustainable, given that some smaller businesses boost wages without seeing a rise in profitability.

A median projection of 1.00% was provided by 33 economists when asked what the BOJ’s terminal rate should be. This opinion remained consistent with a survey conducted in November. The range of forecasts was 0.75% to 2.00%.