Analysts See BOJ Holding Rates in October, With a December Hike and 2% Inflation Assessment in Focus

According to Jin10, Citi expects the BOJ to keep its policy rate at 1.25%, with the next hike expected in December and the terminal rate potentially reaching 2.0%. Citi says markets have largely priced in a gradual path of future hikes, so the October decision may have limited impact on the yen, Japanese government bonds and Japanese equities. Goldman Sachs also expects the BOJ to hold rates at 1.25%. It expects the core inflation forecast for fiscal 2026 could be lowered to reflect currently low inflation, while the fiscal 2027 forecast could be raised because of a rebound in oil prices. Goldman Sachs expects the next hike in January 2027, followed by another in July. BofA expects a hold at 1.25% and an 8-to-1 vote, with hawkish board member Takata likely to cast the sole dissenting vote in favor of a hike. It says the BOJ may announce that underlying inflation has reached a level broadly consistent with its 2% price stability target and slightly raise the median fiscal 2027 core CPI forecast, while leaving its overall assessment of economic growth and risks largely unchanged. ANZ expects a 25-basis-point hike in December and another 25-basis-point hike in March 2027. It says the BOJ must consider economic growth, and that high geopolitical uncertainty and uneven growth do not support aggressive tightening. MUFG sees no clear signal that the BOJ is considering a hike as soon as this month. It expects the BOJ may say underlying inflation has reached a level consistent with its 2% target while continuing to emphasize upside inflation risks. MUFG expects 25-basis-point hikes in December 2026 and April 2027. Wells Fargo expects the BOJ to hold at 1.25%, with attention on its latest forecasts and whether policymakers express greater confidence in the persistence of domestic inflation pressures. It continues to expect a December hike and further rate increases in 2027, bringing the policy rate to 1.75%. Danske Bank expects a hold at 1.25%, with the next hike in December. It says accumulating inflation pressures and a steady recovery support further tightening, but the BOJ's cautious stance makes a hold appear certain. Brown Brothers Harriman expects the BOJ to hold rates at 1.25% to allow more time to assess the effects of the 25-basis-point hike implemented in September. It says current strong underlying inflation data leave ample room for a more hawkish outlook report.