Fitch expects BoJ interest rate at 0.75% by 2025

Dhwani Mehta FXStreet

Fitch Ratings said in its latest report on the Bank of Japan’s (BoJ) policy outlook that the “BoJ could hike rates to 0.5% by the end of 2024, 0.75% in 2025 and 1% by end-2026.”

Additional takeaways

BoJ is bucking the global trend of policy easing and hiked rates more aggressively than we had anticipated in July. This reflects its growing conviction that reflation is now firmly entrenched.

Core inflation above the BoJ’s target for 23 straight months.

Firms prepared to grant “ongoing” and “sizable” wage rises.

Situation quite different from the 1990s “lost decade” when wages failed to grow amid persistent deflation.

BoJ’s goal of a virtuous wage-price cycle.

BoJ’s confidence that it can continue to raise rates towards neutral settings.

A more hawkish BoJ could continue to have global ramifications.

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

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