The veteran head of markets at one of Japan’s largest banks sees the potential for the central bank to raise benchmark interest rates to a three-decade high of 2% if economic trends persist.
The Bank of Japan is likely to increase the policy rate to 1% this year from the current 0.5% as long as the U.S. economy doesn’t falter, said Masamichi Koike, head of Sumitomo Mitsui Financial Group’s global markets business. Beyond that, “I don’t know if it’s in 2026 or 27, but if a time comes where there’s a need to cool the economy or inflation then I think it would have to rise to 2%.”
In turn, benchmark 10-year Japanese government bond yields are likely to keep climbing, exceeding 2%, Koike said in a recent interview. As a result, his bank is holding off on adding large quantities of the notes to its ¥40 trillion ($270 billion) securities portfolio.
