Nomura Securities revises its Bank of Japan outlook, potentially bringing forward the timing of rate hikes to December while leaving the terminal rate unchanged — Nomura Securities’ Kyohei Morita (森田京平)

The Bank of Japan concluded its monetary policy meeting on 18 September and raised its policy rate target to around 1.25%. The decision was in line with market expectations, passing by a majority of 7 votes. The dissenting votes came from committee members Asada (浅田) and Sato (佐藤).

Nomura Securities revised its Bank of Japan outlook in light of changing conditions. Against a backdrop including higher crude oil prices, it indicated that the timing of an additional rate hike may be brought forward to December, while expecting the terminal rate to remain unchanged at the previous forecast of 1.75%.

Nomura Research at Nomura Securities assessed that the market’s focus would be on the Bank of Japan’s explanation rather than on whether it implements an additional rate hike. It examined four points: the degree to which upside risks to prices are emphasized, whether there has been a change in the Bank’s policy stance, its approach to assessing cumulative effects, and whether it refers to the next meeting.

Regarding additional Bank of Japan rate hikes, Nomura Securities’ main scenario brings forward the timing by one meeting, setting the timing at December 2026 and March 2027. Risk scenario A assumes rate hikes every 3 months, while risk scenario B newly assumes three consecutive rate hikes.

There is also a view that, depending on crude oil price developments, the Bank of Japan may raise its fiscal 2026 and fiscal 2027 outlooks in its published Outlook for Economic Activity and Prices. Nomura Securities is also monitoring developments at the Federal Reserve.