BOJ Set to Hike Rates Amid Rising Price Pressures

Japan's core consumer inflation held steady near the central bank's 2% target in August, according to data released on Friday. The core consumer price index (CPI) rose 1.7% from a year earlier, compared with a median market forecast for a 1.8% gain.

The BOJ is widely expected to raise interest rates to a 31-year high of 1.25% later on Friday. This comes after the central bank raised interest rates to 1% in June and kept them steady in July but signaled a strong chance of a near-term hike due to mounting price pressures.

Rising fuel costs from the Middle East conflict and higher import prices from a weak yen have added pressure on the economy, prodding warnings from the BOJ of the risk of an inflation overshoot. Despite this, core inflation has stayed below the BOJ's 2% target for eight straight months.

Analysts polled by Reuters expect the BOJ to hike rates to 1.25% on Friday, 1.5% by end-March next year, and then to 1.75% in the second quarter of 2027.