Reuters Poll Puts a Bank of Japan Rate Rise to 1.25% This Month

The Bank of Japan will raise interest rates to 1.25% on 18 September and go on to 1.75% faster than previously expected, according to a Reuters poll of economists^1,2. The survey was reported from Tokyo by Reuters and carried widely on Thursday².

Policy board members have been making the same case in public. Board member Kazuyuki Masu said the bank is expected to keep raising rates, flagging oil costs, food prices, producer prices and the weak yen as the pressures behind that view⁴. Speaking in Fukui, a board member said the bank needs to raise rates further to complete policy normalisation³. A board member also said the bank will continue to raise its key interest rate to ensure it does not fall behind the curve⁷.

Why it matters to investors

The currency has already moved. The yen traded around 153.4 per dollar on Thursday, close to its strongest level in seven months ahead of the expected decision⁵. The dollar was down 0.23% at 153.65 yen, not far from Tuesday’s seven-month low of 152.89⁶.

The funding question follows the currency. Reuters’ market columnist put it directly: with the yen surging, what will fund foreign-exchange carry trades now⁸. The rally to a seven-month high has been driven by expectations of faster Bank of Japan tightening and by shifting bets about Japanese investors⁸. A funding currency that appreciates while its home policy rate is being raised is a different proposition for anyone borrowing in it^1,8.

That re-pricing runs through more than the yen itself. The board members quoted this week tie the rate path to oil, food and producer prices rather than to wages alone, which links Japanese policy to the same energy shock moving European and US inflation prints⁴.

What to watch

The immediate marker is the 18 September decision and whether the bank matches the 1.25% the poll expects². After that the question is pace: the poll’s second leg has the rate reaching 1.75% sooner than earlier surveys assumed¹.

External pressure is part of the backdrop. The Reuters poll also canvassed economists on how far US Treasury Secretary Scott Bessent’s comments on Bank of Japan policy had affected it¹. Masu’s list of price pressures gives the near-term checklist: crude costs, food, producer prices and the level of the currency itself⁴.