Bank of Japan poised to raise rates next week, hints at faster tightening
The Bank of Japan is expected to lift its policy rate by 25 basis points next week, reaching 1.25%, and may signal a quicker pace of future hikes if inflation risks rise.
Four insiders familiar with the Bank of Japan's deliberations expect a 25-basis-point rate hike at the September 17-18 meeting, raising the policy rate to 1.25%, a peak unseen for 31 years. The decision follows a June increase to 1% and reflects confidence that the economy is on a modest recovery path with inflation edging toward the 2% target. The central bank anticipates that even at the higher rate, financial conditions will remain accommodative, but it is monitoring price risks from a rebounding yen, rising oil prices, and geopolitical factors.
Board member Kazuyuki Masu indicated no immediate need for a larger move, while Governor Kazuo Ueda is expected to avoid committing to a specific terminal rate, leaving future hikes dependent on data. The BOJ’s outlook includes projections of core consumer inflation reaching 2.5% by fiscal 2027, with further rate hikes possible through 2027.
Why it matters
The rate hike will affect borrowing costs, the yen and global markets, shaping Japan's economic recovery.
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