The Bank of Japan has indicated that it plans to raise the policy rate from around 1.0% to around 1.25% at next week's Monetary Policy Meeting, making a rate level not seen for approximately 31 years increasingly likely.
The Bank of Japan is said to be planning to raise the policy rate from around 1.0% to around 1.25% at its Monetary Policy Meetings on 17 and 18 September. If implemented, the move would bring rates to their highest level in approximately 31 years and mark the first rate hike in three months, since the June meeting. Markets see a 25-basis-point hike as the base case, while the more aggressive 50bp option has been ruled out.
Factors cited as supporting a rate hike include inflationary pressure from the weaker yen and higher crude oil prices, as well as public pressure from the US Treasury Secretary. The Bank of Japan is considering accelerating the pace of rate hikes from once every six months to once a quarter, suggesting faster monetary policy normalisation, although cautious dovish members remain on the committee. The final decision is said to be based on economic and price data available before the meeting.