Former BOJ Policy Board member Makoto Sakurai, in an interview with Reuters, said he expects the Bank of Japan to continue raising interest rates every three months, with the policy rate reaching 2% by next June. The BOJ decided at its September 17-18 monetary policy meeting to raise the policy rate to 1.25%, the shortest interval of three months for an additional hike since the end of its ultra-loose policy in March 2024. Sakurai called this a major turning point in monetary policy conduct. With heightened tensions in the Middle East, crude oil import prices have risen 70% to 80% compared with before the U.S. and Israeli military strikes on Iran, and he believes that as companies pass on costs, headline CPI is highly likely to exceed 3% from the year-end through the fiscal year-end. He expects the BOJ to raise its inflation forecasts for both fiscal 2026 and fiscal 2027 in its October outlook report, and said that while the timing of the next rate hike will basically be December, a hike in October is also possible if the upward revision is substantial. Regarding this rate hike, U.S. Treasury Secretary Bessent commented on BOJ monetary policy for several consecutive days, creating an unusual situation in which the market almost fully priced in a hike at the September meeting, and Sakurai said it cannot be denied that the BOJ is being helped by U.S. Treasury Secretary Bessent.
Sakurai predicts BOJ hikes every three months to 2% by next June, pushing JGB yields higher (bond prices fall).
Expected BOJ rate hikes to 2% make the yen more attractive, strengthening JPY versus USD.
