The BOJ is increasingly expected to raise its policy rate to 1.25% at its September Policy Board meeting, with another hike possible before year-end. Meanwhile, any correction of the yen's weakness is expected to be limited.
The BOJ is reportedly increasingly likely to raise its policy rate from the current 1% to 1.25% at its monetary policy meeting on 17 and 18 September, meaning another hike just 3 months after the previous one.
The terminal rate is generally expected to be around 2%, with the level likely to rise over the next several months. It has been reported that the 2% inflation target could come within realistic reach in the second half of FY2026.
Another hike is expected by December this year, followed by at least 1 hike next year and possibly several, according to current forecasts.
A correction of the yen's weakness is expected to remain difficult, with the effects of additional Fed rate hikes, interest-rate differentials between Japan and other countries, and fiscal policy reportedly continuing to weigh on the yen.