The Bank of Japan is likely to raise its policy rate by 25 basis points from 1% to 1.25% at its September 17-18 meeting, according to Takuji Aida, an economic adviser to Prime Minister Sanae Takaichi, with another increase possible by January next year. The yen strengthened past 154 per dollar on Tuesday to its strongest level since February, supported by carry-trade unwinding, expectations of capital returning to Japan and US political pressure for tighter monetary policy. Japanese wages rose at their fastest pace since 1997, reinforcing expectations for a more hawkish BOJ stance. Japan's 10-year government bond yield steadied around 2.91% as markets priced a near-term rate increase. The developments point to growing recognition within Takaichi's previously dovish administration that additional tightening may be needed to restrain yen weakness and inflation, while an unusual Government Pension Investment Fund meeting fueled speculation about a higher domestic-bond allocation.