BOJ Prepares for September Rate Hike Amid Rising Price Pressures

The Bank of Japan (BOJ) is considering raising interest rates as early as September due to growing alarm over price pressures from various sources, including the Middle East conflict and strong global demand for artificial intelligence (AI).

According to three sources familiar with the BOJ's thinking, an early rate hike has become a strong possibility, with one source stating that 'an early rate hike has come into sight'.

The BOJ has been keeping a close eye on inflation expectations, which have been rising steadily and are now approaching 2 percent. Additionally, wholesale inflation remained elevated at three-year high levels in July, increasing the likelihood of price pressures spreading to consumer goods.

While the BOJ kept policy steady last month, it delivered a strong signal about the possibility of an early rate hike by warning that mounting price pressures could push underlying inflation above its 2 percent target.