The Bank of Japan is widely expected to raise its policy rate by 25 basis points to 1.25% at its Sept. 17-18 meeting, taking borrowing costs to their highest level in more than three decades. The increase would follow the central bank's June hike to 1% and would leave markets focused on guidance over the pace and eventual extent of further tightening. Interest-rate swaps assign a 97% probability to a September move, while markets have fully priced rates reaching 1.5% by January. A recent rebound in the yen has reduced pressure on the BOJ after the currency fell to a four-decade low in July, but officials remain alert to renewed carry-trade unwinding, higher energy costs and inflation risks.