BOJ Set for Rate Hike as Inflation Reaches Three-Decade High

The Bank of Japan (BOJ) is expected to raise interest rates by 25 basis points at its two-day meeting, according to a recent CNBC survey. This would bring the benchmark rate to a fresh three-decade high of 1.25%, signaling an acceleration of the tightening cycle. The survey, conducted among 18 economists and analysts between September 9-14, found that around 89% of respondents expect a 25 basis point hike.

The move is seen as a response to inflationary pressures in Japan, with the country's headline inflation rate hitting its highest level this year at 1.9% in July. The rise in energy costs due to the Iran war has also contributed to the upward trend. Additionally, real wages have risen for the seventh consecutive month, reaching 2.4%.

Treasury Secretary Scott Bessent had earlier urged BOJ Governor Kazuo Ueda to take 'decisive market and monetary steps' at the G20 finance ministers and central bank governors meeting. This has been seen as a push from the US government for the BOJ to normalize its policy.