A Reuters poll conducted from Sept. 1 to 8 showed 66 of 68 economists, or 97 percent, expecting the BOJ to raise its policy rate to 1.25 percent on Sept. 18. The figure was up sharply from 57 percent in the previous survey.
The survey figure does not represent the entire market, but broader indicators and forecasts point in the same direction as expectations of a September move have strengthened rapidly in recent weeks.
MUFG Research said the overnight index swap market was already assigning about a 90 percent probability to a September hike at the end of August. Its own rate assumptions call for the BOJ rate to rise from 1.00 percent to 1.25 percent in the third quarter.
MUFG expects the rate to reach 1.50 percent in the first quarter of 2027 and 1.75 percent in the second quarter. MUFG said the BOJ can accelerate the pace of normalization as underlying inflation approaches its 2 percent target.
Daiwa Capital Markets has also maintained its call for rate increases in September and December, although it plans to reassess the pace of tightening once the policy rate reaches 1.50 percent.
Oxford Economics late last month revised its forecast toward faster tightening, projecting hikes in September and December this year and another in April 2027 that would take the policy rate to 1.75 percent.
The convergence is not complete.
Nomura Securities continues to assign a 60 percent probability to an October hike as its main scenario, while putting the probability of a September move at just 10 percent. Nomura expects further increases in March and July 2027.
Nomura said underlying Japanese inflation still has limited ability to accelerate independently of yen weakness and higher oil prices, leaving room for the BOJ to wait for additional evidence before tightening.
The BOJ is scheduled to hold its next monetary policy meeting on Sept. 17 and 18, with Governor Kazuo Ueda due to hold a press conference after the decision.
The central bank raised the uncollateralized overnight call rate to around 1.00 percent in June, before leaving the rate unchanged at its July meeting.
Recent economic data have reinforced expectations that policymakers have room to tighten further.
Japan's economy expanded at an annualized 1.4 percent rate in the second quarter, revised up from an initial 1.1 percent estimate. Real wages increased 2.4 percent in July from a year earlier.
The yen's earlier weakness and persistent inflation pressures have also helped bring forward tightening expectations, while rare coordinated yen-buying intervention by Japan and the United States has altered the policy backdrop surrounding the BOJ.
In the latest Reuters poll, 82 percent of economists said the joint intervention and remarks from U.S. Treasury Secretary Scott Bessent had significantly or somewhat reduced political barriers to BOJ rate hikes.
Attention is increasingly shifting beyond September to how quickly the BOJ could move thereafter.
Twenty-four of 66 economists in the Reuters survey expected another increase to 1.50 percent in either October or December. By the end of March 2027, 89 percent expected rates to reach at least 1.50 percent. By the end of the following quarter, 62 percent saw at least 1.75 percent.
The divide between forecasts from MUFG and Daiwa, which expect an earlier move, and Nomura's October base case suggests the September decision is not unanimous among major houses. Market pricing and economist surveys have nevertheless moved decisively toward further tightening.
AJP Takeaways
- Reuters polling showed expectations for a BOJ hike in September had strengthened sharply across economist surveys, derivatives pricing and several major research houses, although the poll's 97 percent figure applies specifically to its 68 respondents.
- MUFG, Daiwa and Oxford Economics expect a September move, while Nomura remains a notable outlier with a 60 percent probability on an October hike and only 10 percent on September.
- BOJ rate expectations are shifting toward the pace of further tightening, with a 25-basis-point September move increasingly priced in and attention turning to whether the central bank could raise rates again by year-end.
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