BOJ Sets Sights on 1.25% Rate Hike in September Amid Yen Weakness

The Bank of Japan (BOJ) may raise its benchmark interest rate to 1.25% in September 2026, according to a majority of economists surveyed by Reuters.

This shift marks a sharp change from previous expectations, with only 5% of economists expecting a hike in the third quarter in July's survey.

Inflationary pressures stemming from the US-Israel war and the weakening yen are prompting the BOJ to accelerate policy normalization. The BOJ raised its policy rate to 1% in June, the highest level in three decades.

Ayako Fujita, chief Japan economist at JPMorgan Securities, said an earlier policy adjustment has become inevitable due to market expectations and stability concerns.