MNI INTERVIEW: Ex-BOJ's Kameda Sees Hike By December

The Bank of Japan will likely raise its policy interest rate 25 basis points to 0.75% as early as December, though the Board could delay the move to January depending on evolving economic and price conditions, a former BOJ chief economist told MNI.

“If the BOJ confirms that the Japanese and U.S. economies don’t worsen significantly, that the wage-price mechanism is maintained, and the probability of wage hikes is solid, the Bank can raise the rate in December,” said Seisaku Kameda, now executive economist at Sompo Institute Plus.

Kameda has brought forward his June forecast, when he said a rate hike was most likely in January but did not rule out a move in December. (See MNI INTERVIEW: Jan Hike Likely, Dec Not Ruled Out - Ex BOJ)

While a return to positive real wages would support a rate hike, negative real wages would not necessarily preclude one, as the Bank has raised rates under similar conditions in the past, Kameda noted. The BOJ’s upcoming Tankan survey due Oct 1 and the branch managers’ meeting in mid-October will provide key insight into the impact of tariffs on the economy, particularly on business investment plans, he added.

“Solid capital investment plans in the Tankan will be good news for the BOJ, but it’s questionable whether they would trigger a rate hike in October,” Kameda said, adding that the Bank places more weight on moderate wage gains. “The retroactive revisions to U.S. employment data raise questions about the robustness of the economy. But it’s still unclear whether the U.S. is heading into a disinflation-driven downturn, or if the slowdown will be limited and inflationary pressure will remain elevated.”

While the direction of the U.S. economy will remain a key external factor, Kameda said the BOJ’s primary focus is whether Japan’s wage-price cycle continues to function. “If the BOJ can confirm that winter bonuses and 2026 wage hikes don’t deteriorate significantly, the Bank can raise the rate in either December or January,” he said.

The global economic outlook, including tariff impacts, should become clearer by year-end or early 2026, allowing the BOJ to assess how those developments may influence the wage-setting environment, he argued.

BOJ OUTLOOK

Kameda said the Bank’s latest Outlook Report appeared more concerned about upside risks to inflation than previous assessments, although Governor Kazuo Ueda’s public tone at a press conference remained consistent. The Bank removed references to “the effects of the past rise in import prices,” signalling it no longer views inflation as driven solely by cost-push factors, and warned about the sustainability of price rises, he added.

The BOJ instead acknowledged that recent price gains reflect a broader pass-through of rising labour and distribution costs, Kameda said, adding the Bank also flagged the risk of inflation overshooting should elevated prices persist and trigger second-round effects via higher household inflation expectations. While the Outlook Report reflects internal views of BOJ executives, it does not necessarily dictate the governor’s stance, Kameda noted.

He also noted that the Bank had previously justified monetary policy using temporary cost-push narratives, even while emphasising underlying inflation. But with price conditions having changed, it is now unreasonable for the BOJ to base policy on underlying CPI inflation, he said. The Bank expects underlying inflation to slow temporarily, suggesting “its free hand has weakened and the Bank cannot raise the rate for the time being,” Kameda said.