BOJ Eyes Rate Hike in September Amid Inflation Pressures

The Bank of Japan (BOJ) is considering raising interest rates as soon as September and may hike more aggressively thereafter, according to three sources familiar with its thinking. This would reflect the BOJ's growing alarm over price pressures from the Middle East conflict, strong global AI demand, and the yen's downtrend.

An early rate hike has come into sight,' one of the sources said, signalling a strong chance the BOJ will raise rates at its next policy meeting on September 17 and 18. The two-year Japanese government bond (JGB) yield rebounded after Reuters initially reported the central bank's deliberations.

The BOJ could accelerate the pace of rate increases,' the source said, a view echoed by another source. Since exiting a massive stimulus in 2024, the BOJ has raised interest rates at a pace of roughly twice a year, including in June when it took rates to a 31-year high of 1%.