BOJ Set to Hike Rates Again, But Offers Little Clue on Future Tightening

The Bank of Japan is set to raise interest rates at its September 17-18 meeting, most likely by 25 basis points. This would bring the BOJ's policy rate to levels unseen in 31 years, reaching 1.25 per cent.

This rate hike comes just three months after the last one in June and suggests a faster pace of tightening. The BOJ expects financial conditions to remain loose even at this higher interest rate level.

The decision is driven by concerns over inflation risks, particularly with underlying inflation close to 2 per cent. The BOJ's baseline projections suggest that economic and price developments are moving in line with expectations, but the bank will be mindful of upside price risks.