Sources familiar with the matter have indicated that officials at the Bank of Japan are planning to deliberate on raising the benchmark interest rate by 25 basis points this month, while also assessing the potential room for additional rate increases later in the year.

The sources stated that during the policy meeting concluding on June 16, the Bank of Japan is highly likely to discuss raising the policy interest rate to 1%. Officials believe that real interest rates remain low and the risk of inflation moving higher persists, leaving scope for further monetary tightening down the line.

Given the high degree of uncertainty stemming from the Middle East situation, central bank officials will continue to scrutinize the latest data and information up until the final moment before making a definitive decision.

The sources noted that some dissenting opinions opposing a rate hike may emerge during the policy meeting, but these are not expected to be sufficient to alter the decision to proceed with the increase.

Another key topic for this meeting is the Bank of Japan's latest plan for scaling back its bond purchases. According to the sources, officials are leaning towards slowing the current pace of bond portfolio reduction starting from April of next year.