BOJ Expected to Raise Rates Amid Rising Price Pressures

Japan's core consumer inflation has held steady near its central bank target of 2% in August, data showed on Friday. The core Consumer Price Index (CPI), which excludes volatile fresh food but includes fuel costs, rose 1.7% from a year earlier, compared to the median market forecast of 1.8%. This follows a 1.8% rise in July and an 8-month streak of staying below the BOJ's target.

The Bank of Japan (BOJ) is widely expected to raise interest rates to 1.25%, a 31-year high, on Friday as it aims to combat rising fuel costs from the Middle East conflict and higher import prices due to a weak yen. The BOJ raised interest rates to 1% in June but kept them steady in July, signaling a strong chance of a near-term hike due to mounting price pressures.

Analysts polled by Reuters expect the BOJ to hike rates to 1.25% on Friday and then to 1.75% in the second quarter of 2027. The BOJ has warned of the risk of an inflation overshoot, with core inflation staying below its target for eight straight months due to government subsidies aimed at curbing utility bills.