Economists: Bank of Japan most likely to raise interest rates in July; exchange rate volatility may force it to act sooner.

 according to the latest survey by Bloomberg of 52 economists, the exchange rate has become a key factor influencing the Bank of Japan's next decision. The market generally believes that a sharp depreciation of the yen may force the central bank to accelerate its pace of action. After all, Japan's inflation rate has remained above the 2% target for four consecutive calendar years, and a weaker currency will further exacerbate upward pressure on prices.

The survey results show that all respondents predict that the decision-makers will hold steady at the meeting on January 22-23, maintaining the benchmark interest rate at 0.75%.

Regarding the timing of the next rate hike, July is the most popular option, supported by 48% of economists, far ahead of other months; the proportions expecting a rate hike in April or June are both 17%.

The Bank of Japan just raised the benchmark interest rate to the highest level in thirty years on December 19 last year. Nevertheless, only 35% of observers believe this pace of rate hikes is appropriate. More than 60% of respondents indicated that the monetary policy normalization process, which started in March 2024, appears to be "too slow" or "somewhat slow."

About 68% of respondents expect the future pace of rate hikes to be about once every six months.