Latest data showed that core inflation in Tokyo, Japan, rose more than expected in August, and continued high inflation may support the central bank's continued monetary tightening.

Last week, global stock markets saw a sharp fall, with markets attributing the main reason to the unwinding of yen carry trades.

Bank of Japan Deputy Governor Shinichi Uchida said at an event on Wednesday that the central bank will not raise interest rates in times of financial market instability.

At the opening of trading on Monday morning, Japan's two main stock indexes, the TSE and the Nikkei 225, were both down sharply.

On July 31, the Bank of Japan unexpectedly raised interest rates, earlier than the consensus expectations in September and announced plans to cut bond purchases, the yen strengthened sharply, the dollar/yen fell below 150, and the Chinese yuan soared nearly 300 points during the day. Thereafter, the Federal Reserve will announce the interest rate resolution, the market is expected to September the probability of the first cut in about 90%, the expectation of interest rate cuts to promote U.S. bond yields downward, making the dollar index continued to oscillate. Some analysts said that the yen turned around and appreciated does not mean that the yuan will follow the rapid appreciation, before the U.S. election, such as the dollar index due to risk aversion, the yuan is also difficult to maverick, the Japanese economy is still weak, the yen's strength is difficult to sustain.

The Bank of Japan raised interest rates to about 0.25% from about 0.1% and also plans to reduce its purchases of Japanese government bonds, in principle by about 400 billion yen per quarter.

The Bank of Japan held a goods market policy meeting on the 31st local time, decided to adjust the current policy rate of 0% to 0.1% to 0.25%, the interest rate hike for the first time since the lifting of the negative interest rate policy in March this year, in addition, the Bank of Japan also decided to reduce the size of the purchase of Japanese treasury bonds in the next 1 to 2 years. March 19 this year, the Bank of Japan decided to end the negative interest rate policy, the policy rate from -0.1% to 0 to 0.1% range, for the Bank of Japan since February 2007, after 17 years for the first time to raise interest rates. The Bank of Japan is the first central bank in the world to implement a negative interest rate policy, and the Bank of Japan is attempting to stimulate economic growth and boost inflation through this non-traditional monetary policy tool.

After the negative interest rate was lifted, super-large banks and local banks raised the interest rate on demand deposits for the first time in 16 years, which will benefit Japanese household deposits.

In the global spotlight, the meeting will reverberate in global markets, with the yen likely to fluctuate, either extending this month's significant rally or falling back to decades of lows.

On Thursday, the exchange rate of the US dollar against the Japanese yen rose to below 153, reaching a high of over two months.

According to informed sources, officials from the Bank of Japan may not make a final decision until the last minute after reviewing the latest market and economic data at the meeting that ends on July 31st.

According to data from the US Commodity Futures Trading Commission (CFTC), as of the week ending July 16, leveraged funds reduced their net short contracts in yen by 38,025, the largest reduction since March 2011.

Analysts said the yen would not have moved so suddenly and sharply unless it was the Bank of Japan that intervened.

While real wage growth in Japan, net of inflation, remains negative, that situation is likely to be reversed in July.

According to the summary, a member of the central bank's board of directors stated that if the basic inflation rate rises, the central bank will raise policy interest rates and adjust the degree of monetary easing.

But at least for now, the Bank of Japan has not found evidence that it can raise interest rates with an iron heart.

Due to the long-term loose monetary policy, the Bank of Japan appears particularly cautious in controlling the scale of debt reduction.

Major Asian stock indexes were broadly lower on Friday, buoyed by signs of slowing inflation in the U.S. Market focus shifted to the upcoming Bank of Japan meeting, which is expected to tighten policy further.

In May, Tokyo's core CPI (excluding fresh food) increased by 1.9% year-on-year, in line with market forecasts and higher than the 1.6% increase in April.

Amidst the weakness in the yen exchange rate, speculation about BoJ's raising interest rates intensified after its hawkish signal.