Former Bank of Japan board member Makoto Sakurai expects the BOJ to raise its 1.25% policy rate about every three months, reaching 1.5% by year-end and 2% around June 2027; he says consumer inflation may exceed 3% by year-end or early 2027.
Sakurai cited government data showing Japan’s crude-oil import costs had risen about 70%-80% in recent months from levels before the US attack on Iran in February. He also pointed to a weak yen and robust AI-related demand as drivers of price pressure. He expects the BOJ to raise its inflation forecasts in October and most likely hike in December, but said a large forecast upgrade could prompt an October move instead.
The yen fell after investors viewed the BOJ’s message as insufficiently hawkish and focused on two dovish dissenters. Sakurai said the dissenters would not prevent further hikes, but faster increases would at best slow the yen’s decline. He said the currency would not rebound unless Prime Minister Sanae Takaichi changed fiscal policy, and investors would keep selling yen and Japanese government bonds if she continued expansionary policy.
