BoJ Prepares to Raise Interest Rates Amid Inflation and Yen Weakness

The Bank of Japan (BoJ) is poised to raise interest rates for the third time this year, as it seeks to combat inflation fueled by rising energy prices and a weak yen. The BoJ's key rate has been set at 1 percent since 1995, but some members have signaled that they will increase it to 1.25 percent, which would be the highest level in over three decades.

The decision comes as the US Federal Reserve prepares to announce its own interest rate move on Wednesday. The European Central Bank raised rates last week, putting pressure on the BoJ to follow suit. A spike in oil prices due to the ongoing Middle East crisis is expected to continue pushing up inflation, which accelerated towards the 2 percent target set by the BoJ in July.

Takehiko Nakao, Japan's former currency chief and president of the Asian Development Bank, said that a hike to 1.25 percent at the September policy meeting has already been priced in. He warned that if the response is delayed, it may be necessary to raise rates sharply later on.