The Bank of Japan is expected to raise rates this week, according to a CNBC survey

The Bank of Japan is expected to raise interest rates by 25 basis points this week, according to a survey of economists polled by CNBC.

The hike leaves the BOJ’s key rate at 0.5%, the highest level since 2008.

A majority of 18 of 19 economists agreed on moderate hike expectations, with most indicating that the BOJ’s recent change in tone will do what they expected. The survey was conducted from January 15 to 20.

Public opinion By Governor Kazuo Ueda and a Speech Vice Governor Ryozo Himino told business leaders last week that the BOJ was willing to raise rates.

According to a Reuters report, Yuda said on January 16 that the central bank would raise rates if “improvements in the economy and prices continue.”

Himino, for his part, said the bank would debate rate hikes at its upcoming meeting, adding that it would be “unusual” for real interest rates to remain negative after Japan overcomes deflationary conditions.

Several economists polled by CNBC said the headwinds that held back headwinds last month are easing.

However, he noted that a key risk to this forecast is the uncertainty arising from Donald Trump’s presidency and its impact on financial markets and the Japanese economy.

Nomura Securities economist Yuichiro Nozaki described Himino’s speech as a “major motivator” for his call for a rate hike.

“From (Himino and Ueda’s) comments, we assessed that the BOJ is more confident. In terms of wage increases, Himino said that the main scenario is that a higher wage increase like 2024 will be realized in 2025.”

Takeshi Yamaguchi, chief Japan economist at Morgan Stanley MUFG Securities, backed the rate hike call, saying recent comments from the BOJ’s leadership were “a more positive tone on two key points, namely the outlook for wage increases in 2025 and uncertainty over the incoming US administration.”

Another common reason cited by economists for the rate hike is the persistent weakness in the yen, which fell to a six-month low of 158.37 on January 14 before Himino’s speech.

“The yen weakened significantly after the BOJ decided to skip rate hikes in December,” said Stephan Henrich, associate director of Moody’s Analytics.

“This, coupled with a series of tepid inflation publications, raises the odds for monetary policy action in January for consumer, producer and import prices.”

Expectations of a rate hike this week supported the Japanese currency, which strengthened 1.24% in the seven days through Tuesday. of Yen The last 158 ​​strengthened between July and September before weakening towards the end of last year.

LSEG data shows a nearly 88% chance of a walk in the upcoming meeting.

The Bank of Japan says its goal is to ensure a “virtuous cycle” of price and wage increases, in which wages can rise, raising prices and boosting consumption.

A virtuous cycle is expected to lead to sustained growth in the Japanese economy, which has been in the doldrums since the bursting of the property bubble in the 1990s.

Some economic indicators are pointing in the right direction. Japan’s core inflation – which excludes clean food prices – has been above the BOJ’s 2% target for 32 consecutive months and 2024. In 33 years, there has been a significant increase in shunto wage negotiations.