French bank BNP Paribas raises Japan's terminal interest rate expectations to 2.5%

The French bank in Paris has revised its expectations for Japan's terminal interest rate, raising it from the previous estimate of 2.00% to 2.50%. The bank's economist, Ryuutarou Kawano, predicts that the Bank of Japan will maintain a gradual tightening pace of raising interest rates every four to five months. He said that he expects the policy rate of the Bank of Japan to reach 1.25% by the end of 2026, 2.00% by the end of 2027, and ultimately touch the upper limit of 2.50% in September 2028. He also mentioned that inflation rates may continue to stay above the Bank of Japan's 2% target due to the background of expected downward pressure on the yen. He stated that the government of Prime Minister Manae Takai is likely to maintain a passive stance on tolerating interest rate hikes in the future.