Fitch Ratings: BOJ Expected to Hike Rates by 75 bps to 1.5% Within the Year

BlockBeats News, April 28th, Japan has finally shaken off more than two decades of sluggish nominal growth and deflation that have plagued its economy. Fitch Ratings stated that inflation is now entrenched and increasingly driven by domestic factors, supporting Fitch's view that the Bank of Japan will continue to advance monetary policy normalization. Since 2022, overall consumer price inflation has averaged 2.9%, exceeding the Bank of Japan's 2% target.

The recent decline in overall inflation largely reflects government energy measures rather than a weakening of underlying price pressures. Fitch expects the Bank of Japan to continue raising interest rates, with the policy rate projected to increase by 75 basis points to 1.5% by 2026. The real policy rate remains deeply negative and is expected to normalize as the Bank of Japan further tightens policy, which should, in turn, exert some upward pressure on the yen. (Kincentric)