BofA Securities warned the Bank of Japan’s rate-normalization could proceed more gradually than the inflation outlook warrants. BofA expects a 25bp hike this October, followed by further increases in March and July 2027 that lift the terminal rate to 1.75% by end-2027. It said such gradualism risks leaving the BoJ behind the inflation curve; if upside price pressures are stronger than expected, the BoJ may need to quicken the pace of hikes or push the terminal rate higher to return inflation to

BofA Securities warned the Bank of Japan’s rate-normalization could proceed more gradually than the inflation outlook warrants. BofA expects a 25bp hike this October, followed by further increases in March and July 2027 that lift the terminal rate to 1.75% by end-2027. It said such gradualism risks leaving the BoJ behind the inflation curve; if upside price pressures are stronger than expected, the BoJ may need to quicken the pace of hikes or push the terminal rate higher to return inflation to target.