The Bank of Japan (BOJ) could raise interest rates as early as December, according to former BOJ executive Eiji Maeda. He believes expansionary fiscal policies expected under new Prime Minister Sanae Takaichi will help Japan’s economy withstand the impact of U.S. tariffs. Maeda warned that the central bank may already be “behind the curve” in tackling inflation, with slow rate hikes contributing to a weak yen and surging property prices in major cities.
He emphasized that delaying monetary policy normalization risks worsening inflation and hurting households through higher living costs. While a weaker yen benefits exporters, it increases import prices, straining consumers. Maeda expects Japan’s economy to grow moderately, as the effects of U.S. tariffs appear less severe than initially feared, with companies maintaining solid investment and wage plans.
“The BOJ is likely to raise interest rates again either in December this year or January next year,” said Maeda, who now heads Chibagin Research Institute. He noted that upcoming data, including the U.S. economic outlook and Japan’s “tankan” business survey in early December, will guide the BOJ’s next steps. Wage trends from major automakers, often indicators of nationwide pay adjustments, will also influence the decision.
The central bank’s next policy meeting on October 29–30 will assess whether to keep the current 0.5% rate, with a subsequent meeting on December 18–19. Maeda predicts rates could reach 0.75% by year-end and possibly 1% by next summer, approaching Japan’s estimated neutral rate range of 1%–2.5%.
While Takaichi is preparing a large stimulus package to counter rising living costs, Maeda cautioned that fiscal expansion could further fuel inflation. He reaffirmed that the BOJ must independently prioritize price stability to sustain Japan’s long-term economic health.