Bank of Japan Expected to Raise Interest Rates as Inflation Bites

The Bank of Japan is set to raise interest rates by 25 basis points to 1.25% on Friday, according to nearly 90% of economists surveyed.

This decision would mark a faster pace of tightening than the six-month interval maintained since March 2024, when the bank began normalizing policy.

The move is expected due to rising inflationary pressures in Japan, with the overall inflation rate reaching a year-high of 1.9% in July, driven by energy costs amid the Iran war.

Additionally, real wages increased by 2.4% that same month, marking the seventh consecutive monthly rise.

The US government has been publicly supporting Japan's interest-rate hike cycle, putting pressure on its loose monetary policy and expansionary fiscal policy.