By Satoshi Sugiyama

TOKYO (Reuters) –

The Bank of Japan will raise interest rates again by year-end, according to a Reuters poll published on Wednesday. More than half of economists in the poll indicated a December increase.

The findings reflect analysts’ confidence that the BOJ is committed to gradually retreating from decades of expansive monetary stimulus, even as other global central banks, including the U.S. Federal Reserve, trend toward interest rate cuts.

In the August 13-19 poll, 57% of economists, or 31 of 54, indicated the BOJ would raise borrowing costs by the end of the year. The median prediction for the rate at year-end was 25 basis points higher, at 0.50%.

Among a smaller sample of 22 economists forecasting higher rates by year-end and specifying a month for the next change, about two-thirds (14) suggested December, while one-third (8) pointed to October.

“The current policy rate is extremely accommodative,” noted Atsushi Takeda, chief economist at Itochu Research Institute. “The BOJ will continue to raise interest rates toward the neutral rate as long as the 2% price stability target is expected to be achieved.”

The central bank surprised many in July by raising base borrowing costs to 0.25% from a range of 0%-0.1%, just four months after exiting negative rates. At that time, BOJ Governor Kazuo Ueda indicated the likelihood of steady rate hikes in the coming years.

However, his message came shortly before financial market turmoil saw the battered yen rise sharply against the U.S. dollar, while the Tokyo stock market plummeted by its largest margin in 37 years. Markets have since stabilized.

Despite BOJ Deputy Governor Shinichi Uchida moderating Ueda’s hawkish comments, assuring that borrowing costs won’t rise amid market instability, economists assert that the BOJ’s overall stance remains unchanged.

“It is too early to assume that the market turmoil after the July additional rate hike has altered the BOJ’s intended path for rate hikes,” stated Kazutaka Maeda, an economist at Meiji Yasuda Research Institute.

Japan’s economy expanded at a surprisingly fast annualized rate of 3.1% in the second quarter, recovering from an early-year slump, supported by rising consumption, according to recent government data.

Growth is projected at 0.6% for this fiscal year ending March 2025 and 1.1% for the following year, according to the poll. Inflation is expected to average 2.4% this fiscal year and 1.9% the next.

(Other stories from the Reuters global economic poll)