BoJ set to hike rates as soon as September

The Bank of Japan (BoJ) is set to raise interest rates as soon as September and is likely to hike more aggressively thereafter from the current pace of roughly twice a year, three sources familiar with its thinking told Reuters.

Such a move would reflect the Japanese central bank’s concerns over price pressures from the Middle East conflict, strong global AI demand and the Japanese Yen's weakness, which has persisted despite last month's rare US-Japan joint currency intervention.

One of the sources said, "An early rate hike has come into sight," indicating a strong chance the BoJ will raise rates at its next policy meeting on September 17 and 18.

The source stated, "The BoJ could also accelerate the pace of rate increases," a view echoed by another source.

Market reaction

At press time, the USD/JPY pair trades 0.04% lower at around 159.43.