BoJ Poised for Rate Hike Amid Inflation Fears and Weakened Yen
The Bank of Japan is poised to raise interest rates again on Friday to combat inflation and support the yen. The move comes as global markets await the US Federal Reserve's decision today, following last week's increase by the European Central Bank.
A hike in rates by 0.25 percentage points to 1.25 per cent would be the highest level in more than three decades. Some members of the BoJ have signaled that this is likely, but suspense is limited.
The pressure to lift borrowing costs has increased due to surging energy prices caused by the Middle East crisis and the weak yen's impact on imported goods. Inflation accelerated in July towards the 2 per cent target set by the BoJ.
A hike to 1.25 per cent at the September policy meeting has already been priced in, according to Takehiko Nakao, Japan's former currency chief and former president of the Asian Development Bank. He warns that if rates are not raised in a timely manner, inflation may be harder to control.