BOJ Set to Hike Rates Again Amid Inflation Concerns

The Bank of Japan is leaning towards raising interest rates again in September as inflation risks remain high due to yen weakness.

The BOJ's policy rate is currently at 1%, and officials are considering a conventional 25-basis-point hike, which would mark another significant step away from the ultra-loose monetary regime that defined Japan for decades.

The weak yen has strengthened the case for action as it raises the local cost of imported energy, food, and raw materials, making Japan particularly exposed due to its reliance on imports for energy.

Services inflation is also becoming more important, with the BOJ paying closer attention to domestic price pressures, including wages and services, which tend to be more persistent than temporary moves in commodity prices.