TOKYO, Sept 13 (Askume) – Economists unanimously said the Bank of Japan (BOJ) will not raise interest rates at next week’s policy meeting, but most still expect it to do so later in the year, a Askume poll showed on Friday.
That was unchanged from last month’s survey, reflecting analysts’ belief that the Bank of Japan remains determined to move away from decades of massive monetary stimulus while global peers including the Federal Reserve are moving toward rate cuts.
None of the 52 economists surveyed from Sept. 4-12 said the BOJ would raise borrowing costs at its Sept. 19-20 meeting. However, 54%, or 28%, expect the bank to do so by year-end, down slightly from 57% in the August survey.
The average forecast for year-end interest rates was raised by 25 basis points to 0.50%, the same as in the previous survey.
Those forecasting a rate hike at the end of the year are also the Bank of Japan. In the smaller sample of 23 economists who predicted a specific month for the next rate change, more than three-quarters said December, with 18 saying December and the remaining five saying October.
The Bank of Japan is expected to proceed cautiously and raise interest rates roughly every six months while assessing the impact of monetary tightening on the domestic economy, said Junki Iwahashi, senior economist at Sumitomo Mitsui Trust Bank.
However, if the US economy slows significantly or the pace of US interest rate cuts accelerates, causing financial markets to become disrupted again, it will become more difficult to raise interest rates.
The other 15 economists who gave monthly forecasts predicted either a rate hike or no rate hike next year, with 60%, or 9, choosing January.
Just four months after abandoning negative interest rates, the central bank surprised many market participants by raising the basic borrowing cost to 0.25% from 0-0.1% in July.
Despite the sharp decline in the market last month, BOJ officials have repeatedly indicated that the central bank will continue to tighten monetary policy steadily.
Government data released on Monday showed Japan’s economic growth slowed slightly from the previous quarter due to lower business and household spending, a fluctuation in consumption in the second half of the year and the central bank’s plan to raise interest rates.
The economy is expected to improve at a moderate pace as consumers are worried about rising prices and reluctant to spend despite tax cuts and a hefty summer bonus, which will dampen household spending even as incomes rise, said Takumi Sunoda, senior economist at the Credit Gold Central Bank Research Institute.
Economists have yet to reach a consensus on which economic policies of the candidates in the ruling Liberal Democratic Party’s leadership election are most likely to boost medium-term growth.
Of the 21 respondents, economists Shinjiro Koizumi and Taro Kono were ranked first with four votes each. Shigeru Ishiba, Sanae Takaichi and Toshimitsu Motegi were tied for second with three votes each.
No matter who becomes the next leader of the Liberal Democratic Party, the current government’s policies will largely continue, at least in the short term, said Seisuke Sakai, senior economist at Mizuho Research Technologies.
The party leadership race will take place on September 27, with the winner appointed prime minister in a special parliamentary session in early October.
(Additional reporting from Askume Global Economic Survey)
