Most Japanese firms expect 0.25% rate hike in ’24

A Reuters survey revealed on Thursday that most Japanese firms anticipate a rise in interest rates by the Bank of Japan (BOJ) this year, prompting many to accelerate capital spending before borrowing costs increase.

Over 60 per cent of respondents expect rates to reach 0.25 per cent by year-end, up from the current zero level.

40 per cent of companies plan to increase capital spending in the upcoming financial year starting in April, with many aiming to front-load investments before rate hikes. Only 11 per cent anticipate reducing business investment.

Corporate executives cited using retained earnings for capital investments, front-loading bank loans, and reducing interest-bearing debt as strategies in response to potential rate hikes.

The survey, conducted by Nikkei Research for Reuters from March 6-15, included responses from 237 companies. Despite concerns about business conditions, sentiment showed a slight improvement from the previous month.

Regarding profit expectations, 39 per cent of firms anticipate similar levels, while 23 per cent foresee a 10 per cent increase and 13 per cent expect gains of over 20 per cent, primarily driven by improved sales.

In terms of the yen’s outlook, 61 per cent predict it to trade between 140-149 yen to the dollar, with 20 per cent expecting a weaker range of 150-159 yen and 18 per cent forecasting a range of 130-139 yen.