Bank of Japan seen raising rates to 1.25 percent this month

The Bank of Japan is widely expected to raise interest rates to 1.25 percent at its two-day policy meeting ending September 18, according to a poll of economists, after data showed wholesale inflation in Japan remained elevated in August and a senior board member called for further tightening. Japan's producer price index rose 7.6 percent in August from a year earlier, faster than the median market forecast of a 7.4 percent increase, according to Bank of Japan data released on Friday, September 11. The figure followed a revised 7.7 percent gain in July. The yen-based import price index climbed 24.8 percent year-on-year, reflecting how the currency's weakness pushed up import costs. Rising fuel costs linked to the Middle East conflict and higher import prices from a weak yen have added price pressure to the economy, and Governor Kazuo Ueda has said the central bank is closely watching wholesale inflation for clues on how far firms can pass on costs to households. A poll of 68 economists showed all but two expect the Bank of Japan to raise its policy rate from 1 percent, a 31-year high reached in June, to 1.25 percent on September 18.