BoJ Set for Highest Rate Hike Since 1995 Amid Global Monetary Tightening

The Bank of Japan (BoJ) is set to raise interest rates to a 31-year high on Friday, following the lead of the Federal Reserve's rate hike on Wednesday.

The widely expected move would take interest rates closer to levels the BoJ deems neutral to the economy, marking another step away from decades of ultra-low rates that cemented the yen's status as a cheap global funding currency.

Analysts say pressure is mounting on the BoJ to keep pace with its global peers, particularly if the Fed raises rates again in December. 'If the Fed were to raise rates again in December, the BoJ could be forced to do so too,' said Mari Iwashita, executive rates strategist at Nomura Securities.

The BoJ is set to raise its policy rate to 1.25 per cent from one per cent, which would bring the rate within its estimated 1.1 per cent to 2.5 per cent range of Japan's nominal neutral rate.