Nomura Securities has revamped its Bank of Japan scenarios and released a new main scenario centered on a September rate hike. It also presented a risk scenario that includes 2 rate hikes during the year.
Nomura Securities has presented new scenarios for Bank of Japan monetary policy, designating 1 additional rate hike as the main scenario, with hikes in September 2026, January 2027 and April 2027. The probability is 60%. The leading Risk Scenario A assumes 2 additional hikes, or 4 hikes in total, with a probability of 25%. Risk Scenario B assumes additional hikes in October 2026 and March–April 2027, with a probability of 15%.
Under the new main scenario, the number of additional rate hikes is 1 in 2026 and 2 in 2027, with the timing set for September 2026, January 2027 and April 2027 (note). The policy rate is projected at 1.00% currently, 1.25% at the end of 2026 and 1.75% at the end of 2027. The terminal rate is expected to reach 1.75%.
Risk Scenario A assumes 4 additional rate hikes, with the terminal rate reaching 2.00% in June 2027. Under Risk Scenario B, additional hikes are expected in October 2026 and March–April 2027, with the terminal rate expected to remain at 1.50%.
The report notes the possibility that the government’s consumption tax reduction measures could be implemented from April 2027, which could shift the timing of rate hikes under the main scenario. Taking into account the Bank of Japan’s current stance and market reaction, Nomura Securities now sees the timing of the next rate hike as September, changed from October.