ING economists Deepali Bhargava and Lynn Song anticipate that the Bank of Japan will raise its policy interest rate by 25 basis points to 1.25%. This initial hike is expected to be followed by two additional 25 basis point increases scheduled for January and April 2027, bringing the policy rate to 1.75%, according to FX Street.
The projected tightening path marks a clear shift in monetary policy expectations for Japan, where rates have remained ultra-low for an extended period. The gradual rise in rates reflects ING's outlook on the Bank of Japan's approach to managing inflation and economic growth over the next few years.
As Japan's markets closely watch central bank moves, these anticipated hikes could impact currency valuations and equity market sentiment, particularly in the FX and fixed income sectors.