A recent survey indicates that, driven by inflationary pressures, the Bank of Japan is highly likely to raise its policy rate to 1.25% when its two-day meeting concludes on Friday. Such a move would represent an acceleration of its tightening cycle, outpacing the semi-annual pace the central bank has followed since it began normalizing monetary policy in March 2024. The BOJ's most recent rate increase occurred in June.

Approximately 89% of the economists surveyed anticipate a 25-basis-point hike, citing factors such as elevated inflation, rising wages, and pressure from the US government. Japan's headline inflation rate hit 1.9% in July, its highest level this year, partly due to higher energy costs stemming from the Iran conflict. During the same month, real wages in Japan rose 2.4% year-on-year, marking the seventh consecutive month of growth.

The United States has been publicly vocal in urging Japan to continue its rate-hike cycle, creating tension with Prime Minister Shigeru Ishiba's preference for loose monetary policy and expansionary fiscal measures. At the G20 finance ministers and central bank governors meeting earlier this month, US Treasury Secretary Scott Bessent called on BOJ Governor Kazuo Ueda to take "decisive market and monetary policy actions." Washington would welcome a stronger yen, as a persistently weak currency could prompt Japan to sell US assets like Treasuries to support its currency, a move that would push US bond yields higher. In late July, the two nations conducted a historic joint intervention to bolster the yen.

Takahide Kiuchi, executive economist at Nomura Research Institute and a former BOJ policy board member, noted that the Trump administration has effectively constrained any potential moves by the Ishiba government to obstruct the central bank's rate hikes. This, he added, gives the BOJ the autonomy to proceed with monetary tightening. Recent comments from BOJ board members have also leaned hawkish, keeping the door open for a faster pace of rate increases.

The survey, conducted between September 9 and 14, polled 18 economists and analysts. Views varied among respondents. Jesper Koll, research director at Monex Group, expects a single 50-basis-point hike, describing it as a "one-and-done" approach. Meanwhile, Carlos Casanova, senior Asia economist at UBP, predicts the central bank will hold rates steady this time. However, he believes the BOJ is behind the curve and will ultimately deliver two hikes of 25 basis points each, at six-month intervals. He commented, "Current data does not yet support a paradigm shift in policy; there is a lack of sufficiently clear signals to justify accelerating the pace of hikes. The Iran situation and oil prices remain key risks."

When asked which board members would most likely dissent against a hike, about a third of respondents pointed to Tomoyuki Shimada and Ayano Sato. Both are considered reflationists and were appointed by Ishiba this year. On the currency front, roughly 61% of respondents believe the yen will trade in the 155–160 range over the next month. Lee Homin, senior macro strategist at Lombard Odier, stated that the BOJ's hawkish turn should help keep the yen above 160. However, he added that pushing the currency to strengthen past 150 would be challenging, as government and corporate officials would resist an overly rapid or excessive appreciation.