Bank of America Securities has revised its forecasts for Bank of Japan rate hikes following Prime Minister Sanae Takaichi's Liberal Democratic Party winning more than two-thirds of seats in Sunday's parliamentary election. The landslide victory gives Takaichi a mandate to revitalize Japan's economy without negotiating with opposition parties.

The U.S. bank now expects the BoJ to raise rates at its April meeting, moving up from the previously forecast June hike. BofA analysts project the central bank will increase rates every four to five months rather than every six months, reaching a terminal rate of 1.75% by end-2027 compared to the previous forecast of 1.5%. The bank anticipates hikes in April, September, and January 2027, with a final increase in July 2027.

BofA's revision reflects changing economic conditions, with underlying inflation approaching 2% and downside risks receding. The LDP's electoral victory is expected to reinforce the BoJ's vigilance toward yen-driven upside inflation risks. The central bank is likely to raise its policy rate from the current 0.75% to 1.0% in April, based on first-quarter economic data and wage negotiations. A March hike remains possible but would primarily aim to stem yen depreciation if USD/JPY stays around ¥160 despite currency intervention.