Japan: BoJ tightening path in focus – ING

ING economists Deepali Bhargava and Lynn Song expect the Bank of Japan to raise its policy rate by 25bp to 1.25%, citing persistent price pressures. They project two further 25bp hikes in January and April 2027, taking the rate to 1.75%. Markets will also watch upcoming Japanese inflation, trade and core machine orders data for confirmation.

BoJ seen front loading rate hikes

"We expect the Bank of Japan to raise its policy rate by 25bp to 1.25% on Friday amid persistent price pressures."

"Our base case assumes two additional 25bp hikes in January and April 2027, taking the policy rate to 1.75%."

"The logic is straightforward: policymakers may prefer to front‑load tightening while inflation remains elevated, and before the policy backdrop becomes more complicated after April."

"Japan will release its August inflation data earlier that day."

"Market consensus expects headline inflation to edge up to 2.0% year-on-year, while core inflation remains unchanged at 1.8%."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)