The Bank of Japan is reportedly considering raising interest rates at the December meeting and keeping open the possibility of further increases in the future.

According to sources familiar with the matter, Bank of Japan officials are preparing to raise interest rates at the policy meeting later this month, on the condition that the economy or financial markets do not suffer any major shocks during this period. The sources said that the Bank of Japan will also indicate that if its economic expectations are met, it will continue to raise rates, while maintaining caution about how high rates will eventually go. Officials are expected to raise the benchmark interest rate by 0.25 percentage points to 0.75% at the end of the two-day meeting on December 19th. If raised, this would bring Japan's policy rate to the highest level since 1995. The market's focus is on how strongly the Bank of Japan will indicate that there will be further rate hikes in the future. The sources said that Bank of Japan officials are aware of how the market will interpret these comments, indicating that investors have made the correct judgement. Overnight index futures indicate that traders believe there is approximately a 90% probability of a rate hike this month.