Our macro team has recently revised its forecast for the Japanese economy in light of the higher-than-expected wage hike rates emerging from the annual spring labor-management wage negotiations and other factors1. Accordingly, our BoJ monetary policy scenario was also revisited and revised. Previously, we did not specify the timing of additional interest rate hikes after the Bank ended its negative interest rates. However, we now present “additional interest rate hikes in January-March 2025 and January-March 2026” as our main scenario. We expect BoJ to raise the target level for the uncollateralized overnight call rate (TONA) from the current “around zero to 0.1%” to “around 0.25%” in the January-March quarter of 2025 and to “around 0.50%” in the January-March quarter of 2026.
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