BOJ Set for Next Rate Hike as Inflation Concerns Grow

The Bank of Japan (BOJ) is likely to raise interest rates next week by 25 basis points, bringing its policy rate to levels unseen in 31 years. This would be a significant move, as the last time the BOJ's policy rate was at 1.25% was in 1991.

According to sources familiar with the central bank's thinking, the decision is driven by concerns about price pressures and the risk of an inflation overshoot. With the economy on course for a moderate recovery, conditions are seen as favorable for further tightening.

The hike would also indicate a faster pace of tightening, especially if the BOJ raises rates again this year. The last rate hike was just three months ago in June, and another increase could signal that the central bank is becoming more aggressive in its monetary policy stance.