Japan’s central bank could continue tightening monetary policy over the next two years, with the Organisation for Economic Co-operation and Development (OECD) projecting that the Bank of Japan’s benchmark short-term interest rate may rise to 2% by the end of 2027 from the current 0.75%. The assessment reflects growing confidence that Japan’s economy is finally moving beyond decades of ultra-low inflation and weak domestic demand.
According to a Reuters report citing the OECD’s latest outlook, stronger wage growth, resilient consumer demand and improving inflation expectations are giving policymakers room to gradually raise borrowing costs despite global uncertainties, including tensions in the Middle East.
