Former BOJ Chief Economist: Rate Hike to 1.5% Expected by December, Terminal Rate Target at 2%
nashnova research
Former BOJ chief economist Seisaku Kameda expects a December hike to 1.5%, followed by quarterly increases toward a 2% terminal rate — a pace that signals Japan's definitive exit from ultra-low rates and a repricing of yen-denominated assets.
Why is a December hike near-certain?
Seisaku Kameda, now at Sompo Institute Plus under Sompo Holdings, told Reuters the BOJ will most likely raise rates to 1.5% at its December 17–18 meeting.
Recent global market turbulence dragged Japanese equities lower, but he sees short-term volatility as insufficient to derail the hike — unless instability persists right up to the meeting.
The only scenario that could pause the plan: a full-blown AI-boom collapse → severe U.S. downturn → spillover into Japan's economy. This means → only a systemic external crisis would force the BOJ's hand; ordinary market swings won't.
Can the Japanese economy handle quarterly hikes?
Kameda points to two pillars: corporate profits remain strong, and a planned consumption-tax cut on food items should support household spending.
On the other side, inflation pressure keeps building: high energy costs and a weak yen are pushing up import prices, and firms are passing those costs downstream.
In plain terms = the economy can absorb higher rates, while inflation pressure forces the BOJ's hand — both forces point the same way: keep hiking.
Why did the BOJ take so long to declare its inflation target met?
The BOJ only formally announced that core inflation had hit its 2% target at the October meeting — yet Kameda notes most inflation gauges had already reached 2% well before that.
This reflects a central bank scarred by decades of low inflation and deflation, still uncertain whether inflation can sustainably hold near target — and therefore inclined to move gradually.
In plain terms = a central bank traumatized by deflation needs extra time to trust its own data — cautious to the point of conservatism.
The pace is accelerating — where does it end?
The BOJ hiked in both June and September this year, roughly three months apart — a clear acceleration from the roughly six-month intervals seen in 2024–2025.
The October meeting held rates steady but adopted hawkish language, reinforcing market expectations for a December move. Kameda adds: if December slips due to market instability, January is the backstop.
The terminal-rate target is 2%, but reaching it on schedule depends on two variables: the inflation trajectory and how external shocks evolve. This means → the path is clear, but the destination is not guaranteed.
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