Bank of Japan's Interest Rate Decision Outlook: Expected to Raise to 1.5%

On September 18, the Bank of Japan will announce its target interest rate, with several institutions forecasting its decision. Economists surveyed by Reuters expect the policy rate to reach 1.5% by the end of March next year, and 1.75% by the second quarter of 2027. Société Générale anticipates a 25 basis point increase to 1.25%, followed by further hikes to 1.75% in December and March next year. Goldman Sachs believes today’s decision is a foregone conclusion, with the earliest possible further increase in December, as high energy prices and strong AI demand could push inflation above expectations. TD Securities expects a 25 basis point increase to 1.25%, with additional hikes of 25 basis points in December this year and at several points in 2027, ultimately targeting a rate of 2.25%. If the guidance does not include rate hikes in October or December, the yen may come under pressure to the 157-160 range. Mitsubishi UFJ noted that the market expects a 25 basis point increase and hints at further hikes; if the central bank does not provide sufficient hawkish signals, the yen may weaken.

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