BoJ Set to Hike Rates to 31-Year High as August CPI Looms

The Bank of Japan (BoJ) is set to raise interest rates for the sixth time since exiting ultra-loose policy in 2024, with a near-certain quarter-point hike to 1.25% expected. This would be the highest level since 1993.

Today's national consumer price index (CPI) for August will likely have little impact on the BoJ's decision, as it is already close to fully priced by swap markets. The median forecast of 1.8% core CPI excluding fresh food matches last month's reading and remains below the central bank's target of 2%.

Producer prices accelerated to their fastest pace in roughly three-and-a-half years in August, adding pressure for further tightening. However, the BoJ board is not expected to base its decision on today's CPI print.

Governor Kazuo Ueda will hold a press conference this afternoon, where traders will closely watch his language for clues on the pace of further tightening beyond today's expected move.