BOJ Prefers Small Rate Hike to Avoid Market Shock

The Bank of Japan (BOJ) is reportedly considering a cautious approach to interest rate hikes, preferring a small increase to avoid shocking markets.

This decision comes as investors question whether the BOJ will follow the conventional 25-basis-point hike to 1.25% at its September 17-18 meeting.

A number of sources close to the central bank have revealed that they are hesitant to deliver a bigger-than-usual 50-basis-point rate hike, citing concerns about the impact on corporate and household activity.

The BOJ is also considering speeding up the pace of rate hikes to roughly once a quarter, in response to inflationary pressures driven by the Middle East conflict, domestic job market, and rising import costs from a weak yen.