Will Japan exit negative interest rates again and raise the policy rate above 1% before 2031?

Will Japan Raise Rates Above 1% Before 2031?

Japan exited negative interest rates in 2024 after nearly a decade of ultra-loose policy. This prediction asks if the BOJ will go further—raising its policy rate above 1% before 2031.

Arguments for 'Yes'

Japan’s recent wage growth, strong corporate profits, and gradual shift toward domestic consumption have supported moderate inflation. If these forces persist, Japan may finally escape deflationary psychology, giving the BOJ room to normalize rates.

Arguments for 'No'

Japan’s aging demographics, weak long-term productivity, and high government debt could push the BOJ to limit rate hikes. A stronger yen caused by rate increases could also threaten exporters—the cornerstone of Japan’s economy.

This prediction sits at the heart of global macroeconomic uncertainty: is Japan’s inflation sustainable or a temporary post-pandemic anomaly?