Goldman Sachs has revised its projection for the Bank of Japan's next interest rate hike from January 2027 to September, according to a research report led by economists including Tomohiro Ota and Yuriko Tanaka.
The report notes that with the dollar-yen exchange rate approaching the recent intervention zone of 160-164 yen and the market already pricing in a high probability of a rate increase, the BOJ faces a significant dilemma: maintaining current policy could trigger further yen depreciation and rising inflation.
However, the report also suggests that a substantial appreciation of the yen in the coming weeks could delay the rate hike.
Goldman Sachs highlights that the BOJ's vigilance over the risk of core inflation exceeding the 2% target has been steadily increasing, which raises the likelihood of an earlier rate move.
Additionally, the investment bank has raised its estimate for the neutral interest rate from 1.5% to 1.75%.
Looking beyond September, Goldman Sachs expects the BOJ to implement two more rate hikes in January and July of the following year.