MNI INTERVIEW: Ex-BOJ Sakurai Sees Rate Hike As Early As Dec

The Bank of Japan could raise its policy rate by 25 basis points to 0.75% as early as December, assuming economic conditions in Japan and the U.S. remain stable and wage growth continues, former BOJ board member Makoto Sakurai told MNI, bringing forward his previous forecast of an April 2026 hike amid easing trade tensions with Washington.

While an October move – following the BOJ’s Tankan survey, branch managers’ meeting and incoming economic data – cannot be ruled out, the bank will likely prefer to wait for more sufficient data to justify a hike, Sakurai said. 

“It will be difficult for the BOJ to ascertain those uncertainties in October,” Sakurai added, noting that while export impacts may appear early, transmission to production and investment will take longer.

Sakurai, who maintains close contact with BOJ officials after his departure in 2021, previously projected a rate hike in April but brought that forecast forward following the July 22 trade agreement between Tokyo and Washington. (See MNI INTERVIEW: Ex-BOJ Sakurai Sees Next Hike After April 2026) At the time, he flagged major uncertainties around the extent of the U.S. slowdown in Q3 and beyond, and its potential drag on Japanese exports, production, and capex.

However, Sakurai said both the BOJ and the government agree the economy has not worsened, though the impact of recently imposed tariffs is only beginning to emerge.

While persistently negative real wages remain a key vulnerability for the BOJ’s policy stance, he expects them to improve toward year-end, underpinned by the strongest annual wage negotiations in more than three decades. Positive real wage growth, he said, is essential to reinforcing the wage-price cycle the BOJ aims to establish.

Japan’s inflation-adjusted real wages fell for a sixth consecutive month in June, though the decline slowed to -1.3% from -2.6% in May. Governor Kazuo Ueda also said last week that wages should improve toward year-end, though the timing of a return to positive territory remains uncertain.

TARIFF IMPACTS

Sakurai highlighted risks to corporate profits from the tariffs, warning that a drop in earnings could undermine the foundation for strong wage hikes in 2026. Half-year earnings results due from November will be key, helping firms shape full-year forecasts and offering policymakers clearer insight into future wage-setting conditions.

While profits remain elevated following yen depreciation, Sakurai said the degree of tariff-related decline will be critical. The outlook for fiscal 2026 wage negotiations will also become clearer from November, potentially opening the door for a rate move.

Sakurai views the BOJ’s terminal rate at 1.5%. “The Bank wants to raise the policy rate to at least 1%, but 1% is too low to ensure policy flexibility,” he said, noting the Bank will aim for two further hikes in 2026, bringing the rate closer to 1.5%.

The yen is likely to strengthen over time, reflecting divergent policy directions between the BOJ and the Federal Reserve, he continued. A 15% tariff, if converted to exchange rate terms, would imply a yen at JPY127 to the dollar, he added.

In July, the BOJ shifted its inflation risk assessment to “generally balanced” from a previous downside bias, making it harder to argue that underlying CPI inflation remains below the 2% target.