Ex-BOJ Economist Sees December Rate Hike, 2% Endgame

The Bank of Japan will almost certainly raise rates next month, and it isn't done there. Seisaku Kameda, the central bank's former top economist, told Reuters on Friday that policymakers will push the policy rate to 1.5% at the December 17-18 meeting, then keep climbing roughly once a quarter until they hit 2%.

Friday's stomach-churning selloff in Japanese stocks doesn't change the math, according to Kameda. He said only a sustained wave of volatility into the December meeting would force a pause — and the bar is high. A full-blown collapse of the AI boom that drags down US growth and bleeds into Japan's economy is about the only thing that would make the BOJ blink, he said.

The runway looks clear because inflation is doing the pushing. Kameda expects consumer inflation to accelerate as companies pass along costs, food products included, while stubborn energy prices and a weak yen keep inflating import bills. He argues Japan's corporate profits are strong enough and consumption sturdy enough — helped by a scheduled sales tax cut on food — to absorb the tightening.

The BOJ has already ditched its slow-and-steady pace. It hiked in June, then again in September, a much shorter gap than the roughly twice-a-year rhythm of 2024 and 2025. In October it held steady but talked tough on inflation risk, and it declared that underlying inflation has finally reached the 2% target. Markets read the whole thing as a green light for December.

Kameda thinks that callout came late. Most of the gauges the BOJ cited as measures of underlying inflation had already cleared 2% well before, he said, and the delay reflected the central bank's long allergy to tightening after years of deflation and limp price growth. He now sees the gears shifting around June and July onto a once-a-quarter track — with December the likely next step, and January the fallback if markets stay jumpy.

Kameda's verdict carries weight because he spent years inside the BOJ's forecasting machine and now works as an economist at Sompo Institute Plus.