Ex-BOJ official sees 20-30% chance of October rate hike

September 28, 2026 at 04:30 AM2 min

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Former Bank of Japan executive director Kazuo Momma said there is a 20% to 30% chance the central bank will raise its benchmark rate at its October meeting, a second consecutive hike. He said the BOJ's policy focus has shifted to preventing inflation from overshooting its 2% target. The BOJ's underlying inflation gauge accelerated to 2.6% in August from 2.3% in July.

Key Facts

Kazuo Momma, a former BOJ executive director, puts the chance of an October rate hike at 20% to 30%.
The BOJ's inflation gauge excluding fresh food and temporary factors rose to 2.6% in August from 2.3% in July.
Momma's base case sees the policy rate reaching a terminal level of around 2% in June or July next year, implying three more quarter-point increases.
The median estimate of economists surveyed by Bloomberg puts the terminal rate at 1.75%.

Rate Hike Probability

Kazuo Momma, a former BOJ executive director in charge of monetary policy, said the basic pace of hikes will probably be once every three months. He added there is a reasonable chance the BOJ could raise rates at consecutive meetings, putting that possibility at around 20% to 30%. Momma spoke one week after Governor Kazuo Ueda's board lifted the policy rate three months after an increase in June. Ueda said the BOJ had entered a new phase, shifting its focus from coaxing underlying inflation higher toward 2% to preventing it from overshooting that target.

Inflation Pressure

The BOJ released price trend data Friday showing its inflation gauge excluding fresh food and temporary factors accelerated to a 2.6% gain in August from 2.3% in July. Momma said the BOJ has been stressing quite strongly that there is a risk underlying inflation could rise above 2%. He added that at 1.25% the benchmark rate is still low, and the most compelling argument is that the BOJ should move relatively quickly to raise rates. In Momma's base case, the BOJ's policy rate will rise to a terminal rate of around 2% in June or July next year, meaning three more quarter-point increases.