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A Reuters survey released on April 16 showed that a growing number of economists expect Japan’s central bank to raise its benchmark interest rate to 1% by the end of June. According to BlockBeats, rising geopolitical tensions linked to the Iran conflict have increased speculation that the Bank of Japan could move as early as this month or wait until June to deliver the next rate hike.
Economists broadly believe that Japan’s central bank is likely to tighten monetary policy again during this quarter.
This expectation has remained relatively stable even after the United States and Israel launched military action against Iran on February 28.
The conflict has added fresh uncertainty to the global economic outlook, especially by increasing fears of higher energy prices, renewed inflationary pressure, and further weakness in the Japanese yen. These factors have strengthened the case for a more hawkish stance from policymakers.
The Reuters survey, conducted between April 7 and April 14, found that 46 out of 71 economists, or about 65%, now expect the policy rate to rise to 1% by the end of June. This marks a steady increase in expectations compared with previous months, when 60% of respondents predicted the same outcome in March and 58% in February.
The shift suggests that analysts are becoming more confident that the Bank of Japan is preparing for another policy adjustment sooner rather than later.
Among the 40 economists who gave a more specific view on timing, 38% said they expect the rate hike to happen in April, while 35% pointed to June.
This reflects a market that is increasingly divided not over whether tightening will happen, but exactly when it will take place. In last month’s survey, June was the most favored timing at 32%, followed by July at 30%, and April at 27%. The latest figures show that support for an earlier move has grown.
Looking beyond the second quarter, the median forecast suggests that Japan’s central bank may continue raising borrowing costs later this year. Economists now expect rates to reach 1.25% in the fourth quarter, slightly earlier than earlier projections had indicated.
This points to a gradual but continued shift away from the ultra-loose monetary policies that have defined Japan’s financial environment for years.
Further ahead, the median forecast also indicates another 25 basis point increase, taking the policy rate to 1.50% in the third quarter of 2027.
After that, rates are expected to remain unchanged through the end of that year. Still, not all forecasts are the same, and a small number of institutions believe the Bank of Japan could go even further, with rates eventually reaching 1.75%.
Overall, the survey highlights how changing global conditions and domestic inflation concerns are influencing expectations around Japan’s monetary policy path.
With energy risks, currency pressure, and inflation all remaining in focus, investors and economists are watching closely for signs of when the Bank of Japan will make its next move.
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