Most reports expect the BOJ to raise rates by 0.25 percentage points as usual at next week's meeting. A 0.50 percentage-point surprise is not expected, suggesting that the central bank intends to preserve its policy options.
Expectations are growing that the BOJ will lean toward a 0.25 percentage-point rate hike at next week's monetary policy meeting. Despite factors including the weaker yen, higher import costs and a tight labor market, reports indicate that continuing a cautious approach rather than pursuing a large rate hike is the more likely choice, preserving room to keep the policy rate at 1.25%.
Compared with the previous 0.5 percentage-point increase, many believe that a standard 0.25 percentage-point hike this time would address inflation risks while limiting market disruption. The BOJ is also reportedly considering accelerating the pace of tightening to roughly once per quarter, although several people familiar with the matter have expressed caution about giving a specific figure.
Some have also pointed to growing US influence over the BOJ's policy direction, against the backdrop of coordinated intervention with the US and comments from US Treasury officials. Ahead of the 18 September meeting, markets are closely watching the direction of policy and movements in the yen.
On the fiscal front, the initial budget requests for the next fiscal year are reportedly expanding significantly, raising concerns about the government's ability to secure funding that could also cast a shadow over the BOJ's financial stability. Experts assume that rate hikes will remain within the range of the neutral rate while stressing the need to assess economic growth and price trends.