BOJ Set to Hike Interest Rate to 31-Year High Amid Inflation Concerns

The Bank of Japan (BOJ) is set to raise its policy interest rate at an upcoming two-day meeting, aiming to contain inflation risks. The rate hike is expected to take the interest rate to a 31-year high of 1.25 percent from 1 percent. This move comes after three months since the central bank began the current rate hike cycle in March.

The decision to raise rates is driven by concerns over mounting inflationary risks, primarily due to higher oil prices and a weak yen. The Japanese currency has depreciated significantly against the US dollar, with the dollar recently rising above 160 yen despite authorities' efforts to prop up the currency through interventions.

U.S. Treasury Secretary Scott Bessent has urged Japan to strengthen the yen, suggesting that the BOJ raise interest rates. This recommendation comes as the weaker yen poses a risk of fueling inflation in Japan and potentially pushing US Treasury yields higher.