BOJ likely to raise rates 25bp April, former board member says. Gradual move toward 1.25%

A former BOJ board member says April is the most likely timing for the next rate hike, as policymakers await wage data and updated forecasts, signaling a cautious but ongoing normalization process.

This comes via Bloomberg (gated)

• Former BOJ board member Seiji Adachi says April is the most likely timing for the next rate hike.

• March move seen as risky due to limited confirmation on wages and inflation trends.

• April meeting will include wage negotiation outcomes, Tankan surveys and updated forecasts.

• PM Sanae Takaichi unlikely to block hikes due to market sensitivity, particularly yen risks.

• BOJ seen as more proactive, potentially lifting rates toward 1.25% as normalization progresses.

The Bank of Japan is increasingly likely to deliver its next interest rate increase in April rather than March, according to former board member Seiji Adachi, who argues policymakers will prefer firmer confirmation on wages and inflation before acting again.

Speaking to Bloomberg, Adachi said a March hike would rely too heavily on forward-looking expectations rather than verified data. By contrast, the late-April policy meeting will give officials access to a fuller set of indicators, including results from annual wage negotiations, updated business and household sentiment surveys, and the central bank’s revised economic outlook report.

The timing matters. Japan’s large firms are not expected to conclude key wage agreements until late March, meaning the board meeting that ends March 19 would likely precede meaningful clarity on pay trends. Sustained wage growth is a central pillar of the BOJ’s normalization strategy, underpinning confidence that inflation can be maintained around its 2% target without renewed deflation risks.

Adachi’s comments come as current board members have signaled that further tightening is in the pipeline following December’s rate increase, which lifted the policy rate to 0.75%, the highest level in roughly three decades. More hawkish voices within the board have hinted that spring could be an appropriate window for additional action.

Political risks appear manageable for now. Prime Minister Sanae Takaichi, fresh from a decisive election victory, is not expected to obstruct the normalization process. According to Adachi, overt pressure to delay rate hikes could unsettle financial markets and weaken the yen, an outcome policymakers would prefer to avoid. After her first post-election meeting with Governor Kazuo Ueda, no specific policy requests were reported.

Adachi also suggested the BOJ has shifted toward a somewhat more proactive stance since his departure last year. Less emphasis is being placed on the lower bound of estimates for Japan’s neutral rate, implying a desire to rebuild policy space after years of ultra-loose settings.

While he sees scope for rates to rise toward 1.25%, he is less certain about moves beyond that level, given Japan’s modest potential growth rate. Recent data showing subdued annualized GDP growth reinforce the view that tightening will proceed cautiously. For the BOJ, returning rates to around 1.25% would mark a symbolic completion of its exit from crisis-era deflation policies — but the path there remains deliberately measured.