Bank of Japan May Raise Rates Quarterly Through 2027

Former Bank of Japan board member Makoto Sakurai predicts the central bank will implement interest rate hikes approximately every three months, potentially reaching 2 per cent by June 2027. This forecast follows a September rate increase to 1.25 per cent, which was driven by robust AI-related demand and inflationary pressures from crude oil import costs. Those costs spiked 70 to 80 per cent after a February US attack on Iran.

Sakurai suggests the Bank of Japan may revise its inflation forecasts upward in October and could execute another rate hike as early as October or December to ensure inflation does not overshoot the 2 per cent target. US Treasury Secretary Scott Bessent has provided endorsement for these higher interest rates.

Despite the projected hikes, Sakurai argues the yen will not rebound unless Prime Minister Sanae Takaichi abandons expansionary fiscal policies. He notes that aggressive rate hikes may only slow the currency's decline rather than trigger a recovery.