BNP Paribas Raises Japan Terminal Rate Forecast To 2.5%

BNP Paribas has raised its forecast for Japan’s terminal interest rate to 2.5% from a previous projection of 2.0%. According to Jin10, the bank’s economist Ryutaro Kono expected the Bank of Japan to maintain a gradual tightening pace, raising rates once every four to five months. Kono said he expected the BOJ’s policy rate to reach 1.25% by the end of 2026 and 2.0% by the end of 2027, before ultimately hitting a terminal-rate ceiling of 2.5% in September 2028. He added that because downward pressure on the yen was expected to persist, inflation could remain above the BOJ’s 2% target. Kono also said he expected the Takaichi government to continue taking a passively tolerant stance toward future rate hikes.