BOJ set to speed up tightening campaign with rate rise to 1.25% in September
The Bank of Japan plans to accelerate its monetary tightening campaign and raise its key short-term policy rate to 1.25% at its September meeting, Reuters reported on Tuesday, in what would mark another step away from the decade-plus era of ultra-loose policy. A move to 1.25% would build on the gradual normalisation Governor Kazuo Ueda's board began after exiting negative interest rates and yield-curve control in 2024.
By Source Reporters Newsdesk
Thu, 27 August 2026 · 2 min read
The Bank of Japan plans to accelerate its monetary tightening campaign and raise its key short-term policy rate to 1.25% at its September meeting, Reuters reported on Tuesday, in what would mark another step away from the decade-plus era of ultra-loose policy (Reuters). A move to 1.25% would build on the gradual normalisation Governor Kazuo Ueda's board began after exiting negative interest rates and yield-curve control in 2024.
Fresh Japanese inflation data appears to be reinforcing the case. Bloomberg reported overnight that Japan's business services prices accelerated again in July, a gauge closely watched by the BOJ as evidence of broadening wage-driven inflation in the world's third-largest economy (Bloomberg). Service-price momentum has been central to the bank's argument that inflation is becoming sustainably domestic rather than import-led.
Markets have been positioning for exactly this shift. Goldman Sachs is among the banks that now expect Japan to raise rates in September, in part to support the yen, which has been under pressure against the dollar during this year's global turbulence (Moomoo/Goldman). A faster tightening path in Tokyo would have global repercussions: higher Japanese yields tend to pull capital home from overseas assets, a dynamic blamed for amplifying past bouts of volatility in US Treasuries and global equities.
The report lands days before a closely watched stretch of central-bank calendar. Governor Ueda is skipping this week's Jackson Hole symposium, shifting market focus toward upcoming BOJ meetings and the G20, wire services reported (WTVB/Reuters).
For households and firms in Japan, a move to 1.25% would push borrowing costs to their highest in decades of modern policy history, testing heavily indebted borrowers and regional lenders alike. For the global economy, the significance is twofold: Japan joining other major central banks in tightening while the Federal Reserve's own path remains contested — Reuters separately reported this week that Fed officials such as Susan Collins argue US rates may need to rise soon absent further cooling in inflation (Reuters).
**Sources:** Google News
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