94% of Economists Predict "BOJ to Raise Interest Rates in July Under Risk Scenario"

July Increase 29%, September 27%, October 35%

Bloomberg reported on the 23rd (local time) that 29% of economists predicted that the Bank of Japan (BOJ) will raise interest rates this month.

In this survey of 48 economists, 27% forecasted a rate hike in September, while 35% expected it in October.

However, 94% of respondents said that under a risk scenario, the BOJ could raise rates as early as July.

Marcel Thieliant, Head of Asia Pacific at Capital Economics, stated, "The sharp depreciation of the yen and the widespread wage increases among small and medium-sized enterprises suggest strong grounds for a rate hike at the July meeting."

Among respondents who do not expect the BOJ to raise rates this month, the majority said that announcing a rate hike and quantitative tightening simultaneously would cause too much market shock and increase uncertainty about how the market would react.

Another key issue at the July meeting is how much the BOJ will reduce its monthly bond purchases. After maintaining a large-scale monetary easing program for over 10 years, the BOJ has shifted toward quantitative tightening. Respondents expected the BOJ to start reducing purchases from August by 1 trillion to 5 trillion yen per month. From a long-term perspective, the median estimate suggests the BOJ will reduce monthly purchases to 3 trillion yen within two years.

Naomi Muguruma, Senior Fixed Income Analyst at Mitsubishi UFJ Morgan Stanley Securities, said, "The likelihood of a rate hike and bond reduction happening simultaneously is low. The BOJ spent 1.5 months finalizing its bond plans to convey a cautious stance, so it is hard to imagine them taking bold action suddenly."

Bloomberg assessed that while Japan's expected inflation remains high, consumer spending has not shown strong signs of recovery. Amid the yen recently hitting its lowest level in 38 years, Japanese authorities appear to have conducted two currency interventions this year.

Izuru Kato, Chief Economist at Totan Research, said, "It seems the BOJ is actively lowering the yen's value by keeping interest rates significantly lower relative to inflation."

In this survey, 43% of respondents said that authorities' interventions do not affect rate decisions. Twenty-two percent said that the higher the possibility of intervention, the lower the chance of a rate hike, while 9% believed that intervention increases the likelihood of a rate hike.