Bank of America Expects Gradual Bank of Japan Rate Hikes Through 2027

Bank of America Securities said the Bank of Japan may tighten monetary policy more slowly than the inflation outlook would warrant. According to Jin10, the firm forecast that the BOJ would raise its policy rate by 25 basis points in October this year, followed by additional 25-basis-point hikes in March 2027 and July 2027. Bank of America Securities said it expected the BOJ to lift the terminal rate to 1.75% by the end of 2027. The report said the risk of this gradual approach is that the central bank could fall behind the inflation curve. It added that if upward price pressures prove stronger than expected, the BOJ could be forced to raise rates at a faster pace or push the terminal rate higher in order to bring inflation back to its target.