Most firms expect the BOJ to raise its policy rate by 25bp to 1.25% today;
markets are focussing on forward guidance — a less hawkish signal would likely
trigger yen weakness and pressure JGBs. Reuters survey: economists expect the
policy rate to reach 1.50% by end-March next year and 1.75% by Q2 2027, with
most seeing at least that terminal rate. Nikko expects 25bp to 1.25% and 1.75%
by June 2027, with upside to 2.25% if oil rises and other central banks tighten.
BNP sees 25bp now, then further hikes in Dec and next March to 1.75%. OCBC says
the hike is largely priced; the key is the post-September path and whether the
BOJ signals faster normalization while inflation remains elevated. Goldman says
today’s move is certain and the next hike could come as early as December; high
energy, strong AI-driven demand, a weaker yen and loose fiscal policy could push
inflation and yields higher. TD Securities projects a path to 2.25% via hikes in
Dec and several 2027 moves and warns that omission of Oct/Dec hikes from
guidance could send USD/JPY to 157–160. Market pricing already implies ~90bp of
tightening over the next 12 months; if Governor Ueda signals caution, that could
leave the yen exposed. Overall market takeaway: 25bp hike probable; guidance
tone will be the primary driver for near-term yen moves, JGB yields and
expectations for further BOJ tightening.
