Bank of Japan set to lift policy rate to 1% on June 16

The Bank of Japan is poised to raise its key interest rate at its upcoming policy meeting, a move that would mark the highest benchmark rate in nearly three decades. According to multiple individuals familiar with the central bank's deliberations, officials are leaning toward increasing the policy rate from 0.75 percent to 1 percent when the two-day meeting concludes on June 16. The final decision is said to be contingent on avoiding a severe escalation of conflict in the Middle East that could destabilize global financial markets.

Financial markets are widely anticipating the adjustment, with derivatives pricing reflecting approximately an 80 percent probability of a rate hike. This expectation was bolstered by recent remarks from Bank of Japan Governor Kazuo Ueda, which analysts interpreted as signaling a renewed focus on combating inflation and a willingness to implement more frequent rate increases. Two other policy board members, Kazuyuki Masu and Junko Koeda, have also expressed concerns about accelerating price growth in recent weeks.

The potential hike represents another step in the central bank's gradual normalization of monetary policy, following its exit from a...