Economists predict that the Bank of Japan's next interest rate hike will be in July, with the weak yen potentially being the biggest variable

According to a survey of economists noted by Zhitong Finance APP, the Bank of Japan may not raise interest rates again until the summer. In a survey conducted on Monday, about 56% of the 45 observers of the Bank of Japan expect the next rate hike to occur in July, following the central bank's decision last Friday to raise rates to their highest level since 2008.

September is the second most popular time frame, with 18% of respondents predicting a rate hike at that time, while 9% indicated it could happen in June.

Bank of Japan Governor Kazuo Ueda oversaw his third rate hike during his tenure last week and promised further increases if the central bank's economic outlook is realized. The survey indicates that the central bank may pause for a while before raising rates to the highest level since 1995 at 0.75%.

Tsuyoshi Ueno, a senior economist at the Japan Life Research Institute, wrote in his survey response: "I expect rate hikes approximately every six months. If the yen depreciates significantly, the timing of the hike may be advanced, while if U.S. tariffs have a significant impact, the timing may be delayed."

The survey results emphasize Ueda's intention to gradually unwind the Bank of Japan's easing policy. After the governor's third rate hike last week, Ueda and the committee may need some time to determine whether the economy and prices are still developing according to their forecasts.

Many observers of the Bank of Japan pointed out that a weak yen could be a potential reason for the next rate hike occurring earlier than the baseline scenario. Since last Friday's rate decision, the yen has remained around 155 against the dollar, showing little change even after the central bank's rate hike. About 45% of the analysts surveyed indicated that April is the earliest time for the next rate hike in their risk scenarios.

Despite calm in the currency markets, U.S. President Trump announced this week a comprehensive tariff on Colombia, and then suddenly withdrew the threat after reaching an agreement on the repatriation of immigrants, indicating he may continue to disrupt global markets. Analysts remain vigilant about the risks of Japan being suddenly affected by the policies of this new president.

Among observers of the Bank of Japan, the median estimate for the policy rate at the end of this year is 0.75%, and 1% by the end of 2026, consistent with a survey conducted by Bloomberg before the January meeting.

Economists believe that Ueda hopes to raise the policy rate to 1.25% during the normalization cycle that began in March, but they expect the terminal rate median to be slightly lower at 1%.

Before this month's meeting, the Bank of Japan, led by Ueda, clearly stated that it would take action and successfully avoided a repeat of the situation in July. Last summer, the central bank partially triggered a global market crash due to insufficiently signaling the rate hike.

Meanwhile, analysts have mixed views on the Bank of Japan's communication style this time. About 41% said the central bank's guidance before the January meeting was neither good nor bad. About 32% said it was bad, while 23% said it was good or very good Kazuhiko Sano, Chief Strategist at Donghai Tokyo Securities, stated: "The Bank of Japan's communication style is not commendable, but at the same time, there are many issues with the market's response to it."

When asked whether the central bank should ensure that interest rate hikes are almost fully reflected in market pricing as it did this month, 52% agreed or strongly agreed, while 33% disagreed or strongly disagreed.

Mitsumaru Kumagai, Chief Economist at Daiwa Institute of Research, stated: "The significant improvement in the central bank's communication with the market should be recognized. I expect the Bank of Japan to continue raising interest rates while maintaining cautious communication."