Fitch expects BoJ interest rate to be 0.75% by 2025

Fitch Ratings said in its latest report on the Bank of Japan (BoJ) policy outlook that the “BoJ could raise rates to 0.5% by end-2024, 0.75% in 2025 and 1% by end-2026.”

Extra points

The BoJ is bucking the global trend of policy easing and has raised rates more aggressively than we had anticipated in July. This reflects its growing conviction that reflation is now firmly entrenched.

Core inflation above BoJ target for 23 consecutive months.

Companies are prepared to grant “continuous” and “considerable” salary increases.

This is quite a different situation from the “lost decade” of the 1990s, when wages failed to grow amid persistent deflation.

BoJ’s goal of a virtuous cycle of wages and prices.

BoJ confident it can continue to raise rates towards neutral settings.

A more hawkish BoJ could still have global repercussions.

Source: Fx Street

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