A 25 basis point hike would mark the BoJ’s most aggressive tightening step in nearly three decades amid inflation and JPY strength.
The Bank of Japan is expected to raise its benchmark interest rate by 25 basis points to 1% on Tuesday, the highest level since 1995. The move aims to curb inflation and support the Japanese Yen, which has weakened past 160 against the USD, a key intervention threshold for authorities.
Markets have largely priced in the rate increase, limiting its immediate impact on the JPY. However, policymakers will also discuss reducing bond purchases to allow market-driven long-term rates, a potential shift in monetary strategy.
USD/JPY remains above 160 ahead of the decision, while broader USD weakness reflects optimism over a Middle East ceasefire extension.