The Bank of Japan is expected to raise its policy rate by 25 basis points to 1.25% next week. With inflation concerns persisting, it has also signaled the possibility of further rate hikes.
The Bank of Japan is reportedly considering raising its policy rate to 1.25% at next week’s monetary policy meeting, with the decision scheduled for 17–18 September. The increase could bring the rate to its highest level in 31 years.
Bank of Japan officials indicate that conditions are gradually becoming suitable for another rate hike, while signaling a policy of continuing to raise borrowing costs if economic conditions and price trends evolve in line with the baseline scenario. Many believe that financial conditions would remain accommodative even if the rate were raised to 1.25%.
The September rate hike is considered largely priced in by markets, and with no sharp acceleration in wages or prices, many expect the pace of further hikes to remain at 25 basis points. However, renewed inflation risks are a concern depending on the yen’s appreciation and fuel-price trends.
The Bank of Japan is highly unlikely to have predetermined the final policy-rate level, and views among members are also divided over the pace of rate hikes. Comments following upcoming meetings will once again draw attention as an indication of how future rate hikes may unfold.