BOJ could raise rates every quarter, ex-policymaker says

After the rate hike to 1.5% expected by year-end, the BOJ will likely raise rates to 1.75% in the first quarter of 2027 and to 2% by June next year, he said.

While the BOJ's terminal rate is seen around 2%, the level could be higher if inflation remains elevated around 3%, Sakurai added.

The BOJ raised interest rates to 1.25% last week, with its governor signalling the central bank has entered a new phase focused on preventing inflation from overshooting its target, opening the door to further rate hikes.

But the yen fell as investors saw the BOJ's message as not hawkish enough and instead focused on two dovish dissenters as a sign the central bank won't tighten policy quickly enough to narrow the wide Japan-US interest rate gap.

Sakurai said while the two dovish dissenters likely won't deter the BOJ from raising rates further, the faster pace of rate hikes also won't give the yen much support.