Following the BOJ's decision to raise rates by 25 bp at its September 2026 meeting, Nomura Securities expects ultra-long-term interest rates to decline after the rate-hike cycle ends from 2027 onward. The report also addresses concerns about interference in monetary policy by the Takaichi administration.
The BOJ implemented a 25 bp rate hike at its Monetary Policy Meeting on 17–18 September. Nomura Securities now assumes rate hikes every 3 months and has changed its forecast to incorporate additional hikes in March and December next year. This is reportedly likely to mark a shift from the slower pace through June this year to a pace that is standard internationally.
While the administration is expected to refrain from overt interference in BOJ policy operations going forward, attention should be paid to remarks by Cabinet Office participants and the impact of BOJ personnel changes. Remarks by Minister Kiuchi (城内) suggest caution regarding coordination between fiscal and monetary policy, and the risk that policy implementation may once again lag developments could be reassessed in the next phase.
Risks from BOJ personnel changes remain. Involvement in the appointments of BOJ Policy Board members Asada Toichiro (浅田統一郎) and Sato Ayano (佐藤綾野) has been flagged, and depending on the appointment of the next Policy Board members, delays in policy aimed at achieving the price stability target could re-emerge.
The rate-hike cycle is expected to end in 2027, with yields on ultra-long-term JGBs forecast to decline. Nomura Securities expects an additional rate hike within the year and subsequent developments, forecasting that long-term interest rates will accelerate their decline as supply and demand improve and low-coupon issues are sold down.