BOJ Signals Faster Rate Hikes Amid Inflation Risks Build

The Bank of Japan (BOJ) is shifting its monetary policy stance to address rising inflation risks, signaling potentially faster and more frequent rate hikes. This change in strategy comes as policymakers monitor underlying inflation, which is moving closer to the central bank's 2% target.

Former BOJ board member Makoto Sakurai expects the policy rate to reach 2% by June 2025, while markets await a possible upward revision of the 2027 inflation forecast next month. The September hike for interest rates has become increasingly likely if inflation momentum builds.

The BOJ kept rates unchanged in July after raising them to 1.0% in June amid mounting import-driven inflation. Officials expect future interest rate increases to come faster and more regularly as policymakers seek to head off an inflation overshoot.