NEW DELHI: The Bank of Japan (BOJ) is expected to raise its benchmark interest rate to 1.25%, which would mark a 31-year high, as persistent inflationary pressures and rising energy and import costs increase the case for further monetary tightening. The BOJ is scheduled to hold its monetary policy meeting on September 17–18.

The expected 25-basis-point increase would be the first rate hike in three months. Recent data showed Japan's wholesale inflation remained elevated in August, while higher oil prices and yen-related import costs have added to price pressures. The BOJ has been gradually moving away from its long-standing ultra-loose monetary policy as inflation risks remain a concern.

Markets will closely watch Governor Kazuo Ueda's comments for indications about the pace of future rate increases. The decision could also influence the yen and Japanese bond markets, particularly as investors assess monetary-policy differences between Japan and other major economies.