Markets are now pricing in an 85 to 90 percent probability that the Bank of Japan will raise rates at its September 17-18 policy meeting. Deputy Governor Ryozo Himino stressed on August 27 in Saitama the need for timely rate increases to prevent inflation from overshooting the BOJ’s 2% target. Japan’s core Consumer Price Index rose 1.8% year-over-year in July, its fastest pace since January, while the yen remains weak and energy prices continue to climb. The current policy rate stands at 1%, after being raised from 0.75% to 1% in June. Some economists are forecasting a potential terminal rate of around 1.75%.
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