Bank of America Projects BOJ Will Raise Rates by 25bp in October, With Terminal Rate at 1.75% by End-2027

According to Bank of America Securities, on June 10, the institution released a research report projecting that Japan's central bank will raise interest rates at a more gradual pace than the inflation outlook may require. The bank expects the BOJ to hike rates by 25 basis points in October 2026, followed by additional increases in March and July 2027, bringing the terminal rate to 1.75% by end-2027. The risk of this gradual approach lies in potentially allowing the central bank to lag behind the inflation curve, which could force faster rate increases or higher terminal rates if price pressures prove stronger than expected.
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