The Bank of Japan is expected to decide on a rate hike for the first time in three months, raising its policy rate to around 1.25%, with the likelihood increasing that it will reach a 31-year high. Caution over the risks of further yen weakness and rising prices is also intensifying.
The Bank of Japan is holding the second day of its Monetary Policy Meeting and is expected to decide on a rate hike for the first time in three months. Markets expect the hike to take the policy rate to around 1.25%, making it highly likely that the rate will reach a 31-year high.
As the yen moves toward further weakness against the backdrop of US rate hikes, some within the BOJ are increasingly concerned about inflation risks, including the impact of higher crude oil prices and strong AI demand. Further yen weakness is also a concern.
While some analysts say that the BOJ's progress toward its 2% price stability target is supporting the case for a rate hike, some officials are seen as considering options to accelerate the pace of future hikes.
As inflation has an increasing impact on future developments, markets are focused on how the BOJ's policy decisions will affect the balance between price stability and economic growth.