Japan's annual wholesale inflation hit 4.0% in February, data showed on Wednesday, underscoring pressure from rising raw material costs that will keep alive market expectations of a near-term interest rate hike by the central bank.

Daiwa expects the BOJ, which raised interest rates to 0.5% in January 2025, to continue gradually tightening monetary policy. It sees the BOJ raising rates to 0.75% by July 2025, with additional hikes of 0.25 percentage points every six months, reaching 1.5% by early 2027.