BOJ will raise rates again this year, say two-thirds of economists:
Reuters poll
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[April 19, 2024] By
Satoshi Sugiyama
TOKYO (Reuters) - The Bank of Japan will raise interest rates again in
2024, according to two-thirds of economists polled by Reuters, but there
was no clear consensus on when exactly the move would come.
Last month the central bank ended negative rates in a landmark shift
away from its super-easy monetary policy, raising rates for the first
time in 17 years to a 0.0-0.1% range.
The prevailing view among traders that the BOJ will refrain from
aggressive hikes in the near-term so as to support a fragile economic
recovery, which has contributed to the yen's slide against the U.S.
dollar, was backed up by the poll results.
None of the economists polled April 10-17 predicted the next rate hike
would come before the end of June, but just over a third of them, or 21
of 61, anticipated borrowing costs would rise to either 0.20% or 0.25%
in the July-September quarter.
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Chiyuki Takamatsu, chief economist at Fukoku Mutual Life Insurance, said
the BOJ will be inclined to raise rates in July as consumers' price
expectations increase.
"Along with a foreseeable 5%-plus wage hike in large companies, the BOJ
will have more confidence for the achievement of its price target,"
Takamatsu said.
The BOJ targets an inflation rate of 2% but core inflation, which
excludes fresh food items, was last reported at 2.6% in March and is
forecast to be above target for at least a year, giving the central bank
room to hike.
Just under one-third of economists, or 17 of 55, forecast the BOJ will
raise rates to either 0.20% or 0.25% in the October-December quarter,
the survey showed.
Five of the economists who expected a 0.25% rate in the third quarter -
ING Financial Markets, JP Morgan, Meiji Yasuda Research Institute,
Fukoku Mutual Life Insurance and T&D Asset Management - also foresaw the
policy rate being lifted to 0.50% in the three months to December.
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The Japanese national flag waves at the Bank of Japan building in
Tokyo, Japan March 18, 2024. REUTERS/Kim Kyung-Hoon/File Photo
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Median forecasts put the upper end of the target range for the
overnight call rate, currently 0.10%, at 0.25% in the fourth quarter
and staying there until late 2025 by which time it would be lifted
to 0.50%.
Of a smaller sample of 36 economists who provided a specific
forecast for which month the BOJ would next hike rates in, October
was the top pick with 36%, followed by "2025 or later" with 31%, and
19% for July.
"The BOJ is likely to be able to confirm a further increase in wages
and their transfer to service prices over the summer and autumn,
increasing the likelihood of stable 2% price increases being
achieved," said Moe Nakahama, an economist at Itochu Economic
Research Institute.
Receding expectations of a near-term U.S. interest rate cut have
pushed the yen to a 34-year low - over 154 per dollar on Tuesday -
keeping markets on alert for possible intervention by Japan to prop
up the currency.
Nearly all economists, or 91%, said Japanese authorities will step
in at some level to stop the yen from weakening further.
Asked at which level, 76% or 16 of 21 said they expected action if
the yen slumped to 155 against the dollar. Two chose 156, two chose
158, and one said 157.
(Reporting by Satoshi Sugiyama; Polling by Anant Chandak, Susobhan
Sarkar and Devayani Sathyan; Editing by Hugh Lawson)
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