Bank of Japan expected to hold rates but signal future hike, CNBC survey shows

All 16 analysts see no move this week; most anticipate tightening by January

By LineZotpaper AI staff

Published27 October 2026

Read Time3 min

Illustration: Bank of Japan expected to hold rates but signal future hike, CNBC survey shows

The Bank of Japan is widely expected to keep its policy rate unchanged at 1.25% at the conclusion of its two-day meeting on Friday, according to a CNBC survey of 16 economists and analysts. However, all respondents predict the central bank will lay the groundwork for a rate hike in December or January, as domestic inflation and wages continue to rise.

The Bank of Japan (BOJ) holds its policy rate decision on Friday, and the consensus from a CNBC survey is that it will hold steady at 1.25%, the highest level in 31 years after last month's hike. All 16 respondents expect the bank to stand pat this week but to signal a move in the coming months.

Homin Lee, senior macro strategist at Lombard Odier, said macroeconomic factors support additional tightening. "But there may not be sufficient consensus in the policy board for successive rate hikes given the fragility in the domestic bond market," he added.

Sosuke Nakamura, an economist at Citi Research, said he sees no clear signs of inflation accelerating to a degree that would justify consecutive rate increases. Core inflation, excluding fresh foods, rose 2.1% in September from a year earlier, its highest this year, driven by a weak yen and higher energy costs. Inflation-adjusted wages climbed for an eighth consecutive month in August, rising 1.5% year on year.

Finance Minister Satsuki Katayama reportedly told lawmakers last week that Japan was "on the cusp of shifting to a period of sustained inflation driven by rising wages," while acknowledging higher import costs also pushed up prices.

Ryutaro Kimura, senior fixed income strategist at BNP Paribas Asset Management, said he is watching whether the BOJ changes its inflation phrasing in the monetary policy statement from "underlying CPI inflation has been approaching 2 percent" to "has reached 2 percent."

Nine respondents expect the yen to trade between 157 and 158 against the US dollar over the next month. Masahiko Loo, senior fixed income strategist at State Street Investment Management, said that "BOJ normalization, higher domestic yields and shifting institutional flows should gradually narrow the rate differential and pull capital back toward Japan," but that "elevated US yields should prevent a straight-line yen rally."

On Japanese government bond yields, nine respondents expect the benchmark 10-year yield to be between 3% and 3.1% by year end, up from 2.809%, and seven expect the 30-year yield to rise to 4% to 4.1% from 3.829%.

Takuji Aida, chief Japan economist at Credit Agricole, said the next rate hike is likely in January, when the BOJ releases its quarterly outlook report. Thirteen respondents see a terminal rate of 1.75% to 2% by around mid-2027. Masato Koike, senior economist at SOMPO Institute Plus, said that although the policy rate is closer to the neutral level of 2%, he expects the BOJ to stop raising rates at around 1.75% "given the state of the Japanese economy and the need to avoid excessive downward pressure on growth."

The CNBC survey was conducted from October 14 to 26.

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Analysis

Why This Matters

The BOJ’s policy direction influences global bond and currency markets, particularly the yen, which has weakened amid interest rate differentials with the US.
The next hike would bring Japan’s rates to a level not seen in decades, signalling a shift away from prolonged monetary easing.
Markets are watching for changes in the BOJ’s inflation language, which could foreshadow the timing of future moves.

Background

The BOJ raised rates last month to their highest in 31 years. Underlying inflation has been approaching 2%, and wage growth is picking up. However, fragility in the domestic bond market and global economic uncertainties create competing pressures. Finance Minister Satsuki Katayama recently told lawmakers Japan was “on the cusp of shifting to a period of sustained inflation driven by rising wages.”

Key Perspectives

Homin Lee (Lombard Odier): macroeconomic factors support additional tightening, but there may not be enough consensus in the policy board for successive rate hikes given domestic bond market fragility. Sosuke Nakamura (Citi Research): sees no clear signs of inflation accelerating enough to justify consecutive rate increases. Ryutaro Kimura (BNP Paribas Asset Management): waiting to see if the BOJ changes its phrasing from “underlying CPI inflation has been approaching 2%” to “has reached 2%.” Masahiko Loo (State Street Investment Management): BOJ normalization and higher domestic yields should narrow the rate differential and attract capital back to Japan, but elevated US yields will prevent a straight-line yen rally. Takuji Aida (Credit Agricole): expects the next rate hike in January, when the BOJ releases its quarterly outlook report. Masato Koike (SOMPO Institute Plus): the policy rate is closer to the neutral level of 2%, but expects the BOJ to stop raising at around 1.75% to avoid excessive downward pressure on growth.

What to Watch

The BOJ’s monetary policy statement on Friday for any change in inflation language.
The December or January meetings for a potential rate hike, with January more likely according to some analysts.
The terminal rate: many analysts expect the hiking cycle to end at 1.75%-2% by mid-2027.

Sources

Bank of Japan is expected to hold rates this week — but stay hawkish: CNBC survey · CNBC

Checked

12 claims in this story checked against 1 source: 9 supported.

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SupportedThe Bank of Japan is expected to hold rates but signal a future hike, according to a CNBC survey.US Top News and Analysis: “All respondents said they expect the BOJ to set the stage for a rate hike in December or January next year”
Partly supportedAll 16 analysts expect no rate move this week.US Top News and Analysis: “All 16 respondents expect the BOJ to stand pat”
Partly supportedMost respondents anticipate tightening by January.US Top News and Analysis: “All respondents said they expect the BOJ to set the stage for a rate hike in December or January next year”
SupportedThe BOJ is expected to hold its policy rate at 1.25% when its two-day meeting concludes Friday.US Top News and Analysis: “The Bank of Japan is expected to keep the policy rate unchanged at 1.25% at the end of its two-day meeting on Friday”
SupportedThe 1.25% rate is the highest in 31 years following last month’s hike.US Top News and Analysis: “given the bank raised rates last month to their highest level in 31 years.”
SupportedHomin Lee said there may not be sufficient board consensus for successive hikes given fragility in the domestic bond market.US Top News and Analysis: ““But there may not be sufficient consensus in the policy board for successive rate hikes given the fragility in the domestic bond market,” he added.”
SupportedCore inflation excluding fresh foods rose 2.1% year on year in September, its highest level this year, amid a weak yen and higher energy costs.US Top News and Analysis: “Japan's core inflation, excluding fresh foods, for September rose 2.1% from a year earlier, reaching its highest this year as a weak yen raises import costs and elevated energy costs feed through to higher prices”
SupportedInflation-adjusted wages rose 1.5% year on year in August, for an eighth consecutive month.US Top News and Analysis: “Japan's inflation-adjusted wages rose for the eighth month in a row in August, climbing 1.5% from a year earlier”
SupportedFinance Minister Satsuki Katayama reportedly told lawmakers last week that Japan was “on the cusp of shifting to a period of sustained inflation driven by rising wages.”US Top News and Analysis: “Finance Minister Satsuki Katayama reportedly told lawmakers last week that Japan was “on the cusp of shifting to a period of sustained inflation driven by rising wages,””
SupportedRyutaro Kimura said he is watching whether the BOJ changes its inflation phrasing from “underlying CPI inflation has been approaching 2 percent” to “has reached 2 percent.”US Top News and Analysis: “Ryutaro Kimura, senior fixed income strategist at BNP Paribas Asset Management, said he was waiting to see if the BOJ changes its phrasing about inflation in the monetary policy statement this week from “underlying CPI inflation has been approaching 2 percent” to it “has reached 2 percent.””
Partly supportedMasahiko Loo said BOJ normalization, higher domestic yields and shifting institutional flows should narrow the rate differential and pull capital toward Japan, while elevated US yields should prevent a straight-line yen rally.US Top News and Analysis: ““BOJ normalization, higher domestic yields and shifting institutional flows should gradually narrow the rate differential and pull capital back toward Japan,” said Masahiko Loo, senior fixed income strategist at State Street Investment Management. But he added, “Elevated U.S. yields should prevent a straight-line yen rally.””
SupportedMasato Koike said he expects the BOJ to stop raising rates around 1.75% given the state of the economy and the need to avoid excessive downward pressure on growth.US Top News and Analysis: “But “given the state of the Japanese economy and the need to avoid excessive downward pressure on growth, I expect the BOJ to stop raising rates at around 1.75%,” Koike said.”