Oxford Economics expects the Bank of Japan to raise interest rates only once before mid-year.
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Oxford Economics stated that if the Bank of Japan does not act in a timely manner, it could lead to a rise in term premiums. An increase in Japanese government bond yields would worsen fiscal conditions, weaken the yen, and intensify inflation expectations, further increasing the pressure for a steeper yield curve. The market expects the Bank of Japan to take action, but the outcome may fall short of expectations. It is anticipated that the Bank of Japan will keep interest rates unchanged at 0.75% this week and only raise rates once before mid-2026, with the final rate level at 1%.
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