(Bloomberg) -- Bank of Japan watchers still expect the pace of interest rate hikes to be gradual, although they now see rates rising to a higher level in the current cycle, according to the latest Bloomberg survey.
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All 52 economists expect no policy change at the two-day meeting ending on March 19, according to the poll. July remained the favorite choice for the next hike with 48% expecting a move then, dropping from 56% in the previous survey.
A clear majority of 76% predicts the BOJ will stick to a roughly once-every-six-months pace for hikes pace, seeing the next increase coming between June and September. At the same time, a growing minority forecasts an earlier move, with 13% projecting the next increase on May 1, up from 4% in the last survey.
The broad picture of how economists see the central bank’s rate hike trajectory hasn’t changed. One difference since January, however, is how far they now expect the BOJ to keep raising its benchmark. The economists surveyed now anticipate the terminal rate to be 1.25%. That’s up from 1% in the previous survey and shows a stark shift from a year ago, when they saw it at 0.5%.
For full results of the survey, click here.
The changing perceptions correspond with recent market moves. Japan’s benchmark 10-year bond yields have kept increasing over the past month, hitting the highest level since 2008 this week as investors reassessed the final destination of the BOJ’s current hiking cycle.
Governor Kazuo Ueda’s board gathers next week after raising borrowing costs to 0.5% in January. Economists will parse Ueda’s portrayal of greater uncertainties in the global economy in light of rising protectionist sentiments. Since January, US President Donald Trump has ramped up his tariff threats in earnest, putting central bankers across the world on guard.
“Rapid rate hikes aren’t necessary given high uncertainties in the global economy, including the risk of hits from US tariffs,” Shinichiro Kobayashi, chief economist at Mitsubishi UFJ Research & Consulting, wrote in a survey response. “I expect the next hike to be around July and a gradual pace to be maintained.”
Almost three quarters of BOJ watchers said that given Trump’s recent remarks, tariffs could exert enough of a drag on Japan’s economy to delay the BOJ’s rate hike path, according to the poll.