The Bank of Japan is set to raise interest rates to a 31-year high on Tuesday, marking another landmark step in normalising monetary policy as it focuses on taming price pressures from the energy shock caused by the Iran war.

Interest Rate Hike

The decision would mark a more aggressive approach by the BOJ in dismantling the remnants of the radical stimulus of Governor Kazuo Ueda’s predecessor and another step in becoming a more conventional central bank that prioritises fighting inflation.

The BOJ is widely expected to raise its short-term policy rate to 1% from 0.75%, taking borrowing costs to levels unseen since 1995. The hike would be the first since December and align the BOJ with other central banks shifting towards tighter policy to combat inflation, including the European Central Bank.

A weak yen, which pushes up import prices and broader inflation, will also keep the BOJ under pressure to stay on course for further rate hikes, analysts say.

Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.