Japan Rate Hike Timing Uncertain, Analysts Split Between October and December

It is still unclear when the next interest rate hike by the Bank of Japan (BOJ) could be, and analysts are split between October and December.

Although Governor Kazuo Ueda has put an emphasis on inflation, no rate change is expected at this week’s meeting.

A CNBC survey of 32 analysts revealed mixed views: 18.75% expect a hike in October, 25% think it is possible and another 25% foresee a move in December. Meanwhile, 31.25% describe it as a “live meeting,” suggesting the BOJ will wait for more economic data before taking action.

Analysts such as Gregor Hirt of Allianz Global Investors believe strong inflation and wage data could prompt the BOJ to act in October. Masamichi Adachi of UBS also thinks October is likely, but stresses that stable market conditions in Japan and the U.S. are crucial. The BOJ’s “Tankan” survey could also influence the decision.

Comgest’s Richard Kaye argues that if the yen strengthens, inflationary pressures will ease, which could delay the need for another hike. Kaye expects the yen to return to its long-term average of 120-130 against the U.S. dollar, which would support Japan’s rising import costs.

Also, an expected interest rate cut by the U.S. Federal Reserve could weaken the dollar, strengthen the yen and reduce inflation in Japan from lower import costs.

Overall, the BOJ is carefully assessing inflation and market conditions, with the decision likely to depend on future economic data.