BOJ Set for 31-Year High Interest Rates Amid Inflation Fears
The Bank of Japan is set to raise interest rates to a 31-year high on Friday, joining other major central banks in fighting persistent inflation pressures. This move would be the first hike in three months and take interest rates closer to levels the BOJ deems neutral to the economy.
Markets are divided between those who see hawkish BOJ communication as helping lower bond yields and others who see it as lifting yields by moving up terminal-rate bets, according to Katsutoshi Inadome, senior strategist at Sumitomo Mitsui Trust Asset Management.
The BOJ's policy rate is set to be raised to 1.25% from 1%, with analysts polled by Reuters expecting further hikes to 1.5% by end-March next year and then to 1.75% in the second quarter of 2027.
BOJ Governor Kazuo Ueda faces a huge communication challenge when he holds a news briefing after Friday's policy meeting, as repeating its dovish approach risks triggering renewed yen selling that would push up import prices.