A Reuters poll reported by FXStreet indicates that the Bank of Japan (BoJ) is widely expected to raise its key interest rate to 1.0% in June, with 65% of surveyed economists forecasting this move [1]. The poll further reveals that median expectations see the BoJ hiking rates to 1.25% in the fourth quarter of 2024 and reaching 1.50% in the third quarter of 2027, figures that remain unchanged from the previous month's survey [1].
The poll also highlights that 74% of economists believe currency intervention is unlikely to sustainably curb the Japanese Yen's weakness, while 72% view sustained inflation as a greater risk to the Japanese economy than a slowdown in demand [1]. At the time of reporting, the USD/JPY currency pair was trading up 0.09% on the day at 158.52, reflecting a modest market reaction to the anticipated policy shift [1].
The BoJ's recent policy trajectory marks a departure from its ultra-loose monetary stance, which began in 2013 and included measures such as Quantitative and Qualitative Easing and negative interest rates. In March 2024, the BoJ lifted interest rates, signaling a retreat from its previous approach in response to rising inflation and a weaker Yen [1].
The poll underscores that the BoJ's decisions have historically influenced the Yen's value, with previous stimulus measures leading to depreciation. The current policy shift is attributed to inflation exceeding the BoJ's 2% target, driven by a weaker Yen, higher global energy prices, and the prospect of rising domestic salaries [1].
CONCLUSION
The Reuters poll suggests strong expectations for a Bank of Japan rate hike to 1.0% in June, with further increases anticipated in the coming years. Economists remain concerned about sustained inflation and skeptical about the effectiveness of currency intervention to support the Yen. The market has shown a mild reaction, as reflected in the USD/JPY movement.