The Bank of Japan is expected to raise its policy rate from 1.0% to 1.25% at its Monetary Policy Meeting, bringing it to its highest level in approximately 31 years. The yen has been weakening, fueling expectations that the pace of rate hikes may accelerate.
At its Monetary Policy Meeting, which is being held through today, the Bank of Japan is reportedly expected to raise its policy rate from the current 1.0% to 1.25%, bringing it to its highest level in approximately 31 years. With the hike coming after a 3-month interval, the Bank may accelerate the pace of rate increases to curb the risk of rising prices against the backdrop of the yen's decline. The yen is currently trading in the ¥156-per-dollar range.
Meanwhile, expectations for a narrowing of the Japan-US interest rate gap are seen as limited, partly because the United States has also shifted toward rate hikes. The Bank of Japan also regards higher crude oil prices and growing AI demand as factors driving price increases, and some officials say that “one more rate hike will still not be enough.” However, rate hikes also have the effect of cooling the economy, so the Bank is expected to proceed cautiously while seeking an appropriate level.