The Bank of Japan (BOJ) is expected to raise its policy rate by 25 basis points to 1.25% at its September 17–18 meeting, according to sources familiar with the matter.
If the increase happens, Japan’s interest rate would reach its highest level in 31 years, marking another step toward tighter monetary policy after decades of ultra-low rates.
The potential rate hike would come only a few months after the BOJ’s previous increase, signaling that policymakers may be moving faster to address ongoing inflation risks.
A major factor behind the expected move is continued price pressure in Japan. The country’s wholesale inflation reached 7.6% in August, driven by higher energy costs and rising prices across several sectors.
The recent increase in oil prices due to geopolitical tensions has added further concerns that inflation could remain elevated, increasing pressure on the central bank to continue tightening monetary policy.
However, the BOJ is expected to remain cautious as it balances inflation risks with the potential impact of higher interest rates on economic growth and consumer spending.
Markets are now watching whether the September decision will represent the start of a faster rate-hike cycle or a gradual adjustment as Japan continues moving away from years of accommodative monetary policy.
