BOJ May Tighten Monetary Policy Faster Than Expected Amid Rising Inflation

BOJ Policy Shift Gathers Pace

According to BNP economists, Japan's increasingly expansionary fiscal stance may push inflation higher than anticipated, prompting the Bank of Japan to raise interest rates at a faster pace than previously expected.

Earlier Rate Hikes Possible

The analysis suggests the BOJ could begin its tightening cycle as early as April, followed by subsequent hikes every four to five months, aiming for a policy rate target of 2%.

• Accelerated hiking driven by rising inflation outlook
• March rate move remains a possibility
• Policy rate trajectory points toward 2% target

Yen Volatility Raises Intervention Risks

Japanese authorities have already warned about potential intervention if yen swings become excessive, adding complexity to the evolving monetary policy environment.