BOJ Ponders Early Rate Hike Amid Inflation Concerns

The Bank of Japan is considering raising interest rates as soon as September, according to sources familiar with its thinking. This would be an early rate hike, and some board members are calling for a faster pace of rate hikes to avoid being behind the curve on inflation.

The BOJ's growing alarm over price pressures from the Middle East conflict, strong global AI demand, and the yen's downtrend is likely driving this decision. The sources noted that an early rate hike has 'come into sight', with a strong chance of raising rates at its next policy meeting on September 17 and 18.

The BOJ may accelerate the pace of rate increases, which would be roughly twice a year since exiting a massive stimulus in 2024. The current policy rate is at a 31-year high of 1%, set after a June hike.