Sources: The Bank of Japan will raise interest rates to 1.25% next week, potentially signaling an acceleration of tightening, but has not set a final interest rate target.

智通财经2026/09/11 03:06

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Four informed sources stated that the Bank of Japan will raise interest rates at the meeting on September 17-18, most likely by 25 basis points to 1.25%. This would mark the highest policy rate level in 31 years and the second hike in just three months, indicating the pace of monetary tightening is accelerating. Many within the central bank believe that, with the mild economic recovery and rising price pressures, the conditions for another rate increase are forming.
The Bank of Japan may signal readiness to speed up the pace of rate hikes, but it has not set a predetermined plan for the final rate level or timing of further hikes. Governor Kazuo Ueda may reiterate his statement from July that, if financial conditions are seen as too loose, the pace of rate hikes could be accelerated. According to sources, there is still no consensus within the Bank on the speed of rate increases; hawkish members think underlying inflation has reached 2%, while dovish members, led by Toichiro Asada, had objected to the June hike. Thus, Ueda is expected to avoid committing to a specific timetable.
Although markets have largely priced in a rate hike in September and some participants are betting on a possible 50 basis point rise, sources say that since there is no risk of wages and prices surging immediately, the Bank may opt for a routine 25 basis point hike and wait for more data to decide if another hike is needed soon. Bank of Japan board member Hajime Mizuno said underlying inflation is close to reaching 2% but will not exceed it significantly, indicating there is no sign of the need for a sharp hike next week. The survey expects the Bank to raise rates to 1.5% by the end of March next year and to 1.75% in the second quarter of 2027, with most analysts seeing a terminal rate of at least 1.75%.
Since the joint yen intervention by Japan and the US in late July, the yen has surged by more than 6%. Import costs are expected to fall, but this has been offset by Brent oil prices soaring above $100 per barrel, fueling concerns that inflationary pressures will rise again. Annual wholesale price inflation reached 7.6% in August, reflecting growing price pressures, and the Bank forecasts consumer inflation will rebound above the 2% target in the coming months.

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Sources: The Bank of Japan will raise interest rates to 1.25% next week, potentially signaling an acceleration of tightening, but has not set a final interest rate target.

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