Goldman Sachs predicts that the Bank of Japan (BoJ) will maintain its policy interest rate unchanged in June, given the ongoing uncertainty surrounding US tariffs and their potential impact on Japan’s economy. The bank expects the next rate hike to occur in January 2026. This forecast is based on the BoJ’s continued assessment of domestic economic conditions and inflation trends, which have shown signs of strengthening the virtuous cycle in Japan.
Key Points:
Rate Hike Expectation: Goldman Sachs maintains its base scenario that the BoJ will hike rates by 25 basis points in January 2026. This aligns with the BoJ’s gradual approach to normalizing monetary policy.
Inflation Outlook: The BoJ’s inflation forecasts have been revised upward, with core inflation expected to remain above 2% for the next few years. This supports the case for further rate hikes to ensure price stability.
Tariff Impact: The potential impact of US tariffs on Japan’s economy remains a key consideration. While the immediate effects have been limited, the BoJ is cautious about future developments.
Bond Purchase Tapering: Goldman Sachs expects the BoJ to maintain its current tapering plan for Japanese government bond purchases, with a gradual reduction over the next year to approximately 2 trillion yen per month. This is consistent with the BoJ’s strategy to normalize its balance sheet.
Conclusion
The BoJ is expected to remain patient in June, keeping rates steady while monitoring the impact of tariffs and inflation. The January 2026 rate hike is seen as a balanced response to the strengthening domestic economy and the need to manage inflation expectations.
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