Reuters Poll: BOJ Expected to Raise Rates to 1.25% in September
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A Reuters poll shows 57% of economists now expect the Bank of Japan to hike rates to 1.25% in September — a sharp reversal from just 5% in July — as the Takaichi government's fiscal expansion deepens yen weakness and raises urgency for the BOJ to catch up with inflation.
Why did expectations flip in a single month?
In July, only 5% of economists expected a rate hike this quarter. By August, that figure surged to 57%. This means → consensus swung from "unlikely" to "probable" in barely four weeks.
JPMorgan's chief Japan economist Ayako Fujita noted that markets have already priced the hike in. "Delaying could actually destabilize markets," she said.
In plain terms = expectations have overtaken the central bank. If the BOJ doesn't follow through, the inaction itself becomes the shock.
Where does the rate cycle end?
Nearly two-thirds of analysts expect the policy rate to reach at least 1.5% by end-March next year — three months earlier than the July poll suggested.
The terminal rate — the expected peak of the hiking cycle — is also shifting up: 50% of respondents now see it at 1.75%, up from just 19% last month. Those choosing 2% or higher rose from 23% to 36%.
This reflects a repricing of the entire rate path, not just a one-meeting bet. Markets now see a faster tempo than the roughly twice-a-year pace of the past.
Why is fiscal policy making the BOJ's job harder?
89% of surveyed economists said the Takaichi government's fiscal policy will worsen yen weakness.
Nomura's chief economist Kyohei Morita argued that expansionary fiscal policy is "pushing up inflation expectations" and deepening concern that the BOJ is behind the curve — falling behind the pace of inflation with its rate hikes.
He warned that if a consumption-tax cut proceeds while markets doubt its funding, foreign investors may dump Japanese government bonds, accelerating yen depreciation further. This means → fiscal stimulus and monetary tightening are pulling in opposite directions, and the market fears the fiscal side is winning.
Did the joint Japan-U.S. currency intervention work?
After the yen fell to a 40-year low last month, Japan and the U.S. jointly intervened, buying yen to stem the sell-off.
More than two-thirds of respondents called the intervention "not very effective" or "completely ineffective." Most said it delayed rather than solved the underlying problem.
Put simply = real money was spent, but economists broadly view it as buying time while the fundamental pressure on the exchange rate remains intact.
What to watch at the September meeting?
With a rate hike fully priced in and fiscal policy still weighing on the yen, the September decision becomes a test of the BOJ's policy resolve.
This means → the suspense is not whether they hike, but whether the BOJ can signal a more hawkish stance than markets expect — laying the ground for a faster tightening pace ahead.
Content is for reference only, not financial advice.