TOKYO - The Bank of Japan plans to raise its policy rate to 1.25 percent from the current 1.0 percent at its policy meeting later this month, sources familiar with the matter said Tuesday, signaling an acceleration in the pace of rate hikes.
The move, to be decided at a two-day meeting from Sept. 17, would raise the rate to its highest level in about 31 years and follow a rate hike in June, as the BOJ seeks to address the risk of prices rising more than expected amid higher crude oil prices and a weak yen.
The central bank will continue to assess economic and price conditions throughout the meeting before making a final decision.
The BOJ has raised rates about every six months since ending its negative interest rate policy in March 2024, when it overhauled an unprecedented monetary easing framework introduced more than a decade earlier to combat deflation.
A September hike would mark the first increase in three months and come amid growing calls to correct the yen's depreciation against the U.S. dollar, which has largely stemmed from the interest rate gap between Japan and the United States.
Pressure from U.S. President Donald Trump's administration has also been a factor, with Washington concerned that a weak yen and rising Japanese government bond yields could push U.S. Treasury yields higher.
Treasury Secretary Scott Bessent told U.S. media on Aug. 31 that he is confident the Japanese government and the BOJ will take steps to strengthen the yen.
BOJ chief Kazuo Ueda said after a meeting of Group of 20 finance ministers and central bank governors in North Carolina on Sept. 1 that the bank wants to consider a rate hike at every policy meeting, including the September gathering, while assessing the risk of higher-than-expected inflation.
Higher rates would increase borrowing costs for businesses and households, potentially weighing on economic activity.
