The Bank of Japan is expected to raise its policy rate by 0.25 percentage points to 1.25% at its September monetary policy meeting, potentially bringing rates to their highest level in more than 30 years.
Expectations are growing that the Bank of Japan will raise its policy rate by 0.25 percentage points to 1.25% at this month's monetary policy meeting. The increase is expected to bring Japan's interest rates to their highest level in more than 30 years.
Recent data suggest that Japan's inflation rate is approaching the Bank of Japan's 2% target and is expected to continue rising sharply. Core inflation could reach 2.5% by early next year, while some analysts warn that headline inflation could exceed 3% if energy subsidies are not reinstated.
There are concerns that yen depreciation is reducing domestic purchasing power, and the impact of higher crude oil prices is adding to calls for a swift adjustment in monetary policy. Long-term interest rates have continued to rise, with the 10-year Japanese government bond yield reportedly exceeding 3% and reaching its highest level since 1996.
Many experts view the Bank of Japan's move as the first step toward normalizing its long-standing ultra-loose monetary policy. They also believe that the rate-hike cycle could continue, with rates potentially reaching 2% by mid-2027.