Bank of Japan Expected to Raise Interest Rates to 1.25% This Month, Reuters Poll Shows A new Reuters poll shows economists expect the Bank of Japan to raise interest rates to 1.25% this month, supported by political shifts and recent joint intervention efforts. The Bank of Japan is widely anticipated to increase its policy interest rate to 1.25 percent this month, according to a new Reuters poll of economists. Market analysts suggest that shifting political landscapes and coordinated currency measures have paved the way for faster monetary tightening. Economists Forecast Rate Hikes Approximately 82 percent of surveyed economists stated that the joint US-Japan Yen-buying intervention, aimed at halting the currency's slide to 40-year lows, significantly lowered political barriers for upcoming rate hikes. Additionally, remarks from Treasury Secretary Scott Bessent regarding Bank of Japan policy played a crucial role in easing political resistance against monetary tightening. Long-Term Policy Rate Trajectory Looking beyond the current year, 89 percent of analysts, representing 57 out of 64 respondents, expect the policy rate to reach at least 1.50 percent by the end of March next year, up from 65 percent in the previous month. Furthermore, about 62 percent anticipate the interest rate climbing to at least 1.75 percent by the end of the second quarter of 2027, arriving three months earlier than predictions made in August. Current Currency Market Dynamics At the time of writing, the USD/JPY currency pair traded up 0.05 percent on the day at 153.60. The Japanese Yen stabilizes during the Asian trading sessions but remains anchored near a seven-month low touched earlier in the week as hawkish repricing continues to support the currency. The Japanese Yen stands as one of the most heavily traded global currencies, with its valuation dictated by domestic economic performance and central bank policies. Bank of Japan Mandates and Policy History Currency control remains a core mandate for the Bank of Japan, making its policy maneuvers vital for the Yen. While direct currency market interventions are relatively rare due to concerns from major trading partners, the central bank has previously utilized them to curb excessive Yen appreciation. The extended period of ultra-loose monetary policy maintained between 2013 and 2024 triggered significant depreciation of the Yen as global central bank policies diverged. Bond Yield Differentials and Central Banks Over the past decade, the widening gap between the ultra-loose stance in Japan and tightening cycles by institutions like the US Federal Reserve favored the US Dollar. The resulting spread between 10-year US and Japanese bonds heavily favored American currency. However, the Bank of Japan's gradual abandonment of ultra-loose monetary policy alongside interest rate reductions in other major economies is successfully narrowing this yield differential. Safe-Haven Appeal of the Japanese Yen The Japanese Yen retains its reputation as a primary safe-haven investment asset. During periods of global market stress and geopolitical uncertainty, investors routinely channel capital into the Japanese currency due to its perceived stability. Such turbulent market conditions frequently strengthen the Yen against riskier alternative assets. Broader Financial Markets and Precious Metals In broader market movements, AUD/USD extended consolidative price moves during the Asian session amid mixed regional cues and rising Reserve Bank of Australia rate expectations. Meanwhile, gold prices rebounded on Wednesday, breaking a three-day losing streak to reclaim the key 4,400 dollar mark per troy ounce amid a softer US Dollar and steady geopolitical uncertainty. Bitcoin has also continued its recovery from mid-year lows, outperforming traditional assets over the past month. What this means for you The anticipated interest rate adjustments by the central bank will have direct implications for global currency markets, borrowers, and international investors. • Across India: Across India: Shifts in major currency pairs like USD/JPY influence global liquidity and commodity pricing, which can indirectly impact imported energy costs and domestic foreign exchange stability. Investors tracking global markets should prepare for heightened currency volatility. • For Global Investors: For Global Investors: Higher interest rates in Japan alter carry trade dynamics and prompt repositioning across global bond and equity markets. Institutional and retail investors need to factor in narrowing yield differentials when structuring international allocations. Why this happened The shift in monetary policy and expected rate hikes by the central bank stem from long-term macroeconomic trends and external pressures on the Japanese currency. • Currency Depreciation: Currency Depreciation: The dramatic decline of the Japanese Yen toward multi-decade lows created unsustainable economic pressures, necessitating policy intervention. • Political and Bilateral Factors: Political and Bilateral Factors: Joint currency intervention efforts alongside remarks from international financial officials significantly reduced domestic political barriers to tightening. • Yield Spreads: Yield Spreads: Persistent gaps between US and Japanese bond yields favored foreign currencies for years, prompting the central bank to gradually normalize rates to support the Yen. Questions & Answers 1. How much does the Bank of Japan plan to raise rates this month? Economists in the Reuters poll expect the Bank of Japan to raise interest rates to 1.25% this month. 2. What percentage of economists predict a rate hike? Around 82% of economists surveyed expect the central bank to proceed with rate hikes. 3. Where are policy rates projected to be by March next year? About 89% of analysts see the policy rate reaching at least 1.50% by the end of March next year. 4. What was the trading level of the USD/JPY pair during the report? The USD/JPY pair traded up 0.05% on the day at 153.60 at the time of writing. 5. What factors generally determine the value of the Japanese Yen? The Yen's value is determined by Japanese economic performance, Bank of Japan policy, and bond yield differentials with the US. https://trendkia.com/en/market/bank-of-japan-expected-to-raise-interest-rates-to-1-25-this-month-reuters-poll-shows-30593 TrendKia — Har trend, sabse pehle.