TD Securities says GDP running above potential will force the Bank of Japan to
accelerate rate hikes to prevent overheating and will gradually abandon
tightening. Inflationary pressure is picking up and the labor market should
tighten further. TD projects roughly quarterly 25bp increases versus the BOJ’s
typical semiannual rhythm, forecasting 25bp moves next week and in December,
then 25bp hikes at the April, July and October 2027 meetings, taking the target
rate to 2.25%. It warns fiscal policy is a key variable: expansionary fiscal
measures could bring hikes forward or extend the tightening cycle into 2028.
