Wells Fargo expects the Bank of Japan (BoJ) to keep interest rates unchanged at its September policy meeting, but sees scope for a rate hike later in the year if economic conditions remain broadly supportive.
The U.S. bank’s analysts believe the BoJ could raise its benchmark rate by 25 basis points to 0.75% in October, assuming Japan’s domestic economy remains resilient and any global slowdown—particularly in the U.S.—is measured and orderly.
The outlook hinges on steady economic momentum in Japan and evidence that wage growth and inflation are holding up. However, Wells Fargo notes that if there is a sharp deterioration in domestic activity or if wage and inflation indicators weaken significantly, the BoJ may choose to delay its next move until early 2026.
The central bank lifted rates in March for the first time since 2007, ending its era of negative interest rates. Policymakers are now weighing further tightening steps, but are proceeding cautiously given Japan’s fragile recovery and the uncertain external environment.
Upcoming data on wages, inflation, and household spending will be key to determining the BoJ’s path forward, especially as the yen’s ongoing weakness continues to draw attention in policy discussions.
This article was written by Eamonn Sheridan at investinglive.com.