The Bank of Japan plans to raise its key interest rate by 0.25 percentage points — to 1.25%. The decision is expected at the monetary policy board meeting on September 17–18.
This will be the highest rate level in roughly 31 years. The last time the figure stood at 1.25% was in April 1995.
The previous hike took place in June — the rate was then raised to roughly 1%. The new move will follow just three months later, which points to an acceleration in the pace of tightening.
The regulator sees resilience in the domestic economy and growing risks to prices. Among the factors are rising oil prices, a weakening yen and increased demand linked to the development of artificial intelligence.
Core inflation is approaching the 2% target. According to the Bank of Japan, maintaining current conditions could lead to an overshoot of this benchmark.
Financial conditions remain accommodative: lending continues to grow even after the June hike. Sources note that the central bank has no pre-set view of the final rate level.
Governor Kazuo Ueda previously stated that the question of a hike would be discussed at every meeting, including the upcoming one. At a press conference, he may give signals about readiness to accelerate the pace of tightening if price pressure intensifies.
How will this step affect the future dynamics of the yen and the markets?
