Just hours before the Bank of Japan is set to announce its latest policy decision, a key inflation indicator in Japan has accelerated for the fourth consecutive month in August.

According to data released by the Ministry of Internal Affairs on Friday, the consumer price index excluding fresh food rose 2.8% year-on-year, an increase from the 2.7% in July, in line with market expectations.

The market widely expects the Bank of Japan to keep the benchmark interest rate unchanged at 0.25% later on Friday.

Economists will be closely watching Governor Haruhiko Kuroda's comments on the prospects for further rate hikes in the coming months.

More than half of the observers expect the Bank of Japan to raise rates next in December.

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The Bank of Japan has indicated that it plans to further raise interest rates if inflation aligns with forecasts, as real interest rates remain at a considerably low negative level.

Currently, the Bank of Japan's main inflation indicator has been at or above the bank's 2% target level for 29 consecutive months.

Economist Yuichi Koji from Meiji Yasuda Research Institute said, "Prices remain relatively stable, and the Bank of Japan can say it is moving towards its 2% price stability target.

There is still a possibility of another rate hike this year."

Bloomberg economist Taro Kimura commented, "The rise in Japan's CPI in August may strengthen the Bank of Japan's confidence that inflation is supporting underlying price trends, driven by wage growth."

A deeper index excluding energy costs and fresh food prices rose by 2%, higher than the 1.9% in July.

The Bank of Japan considers service prices as a key indicator of price trends, and this index rose by 1.4% year-on-year, the same as in July.

Shortly after the Bank of Japan raised rates in July, global markets plummeted, and the bank's communication strategy was questioned.

Since then, officials have explained the central bank's policy stance, with Deputy Governor Masayoshi Amamiya stating that the Bank of Japan will not raise rates during market instability.

Other officials, including Haruhiko Kuroda, have emphasized that the Bank of Japan will continue to raise rates if prices and the economy align with the bank's expectations.

It is noteworthy that the Bank of Japan's policy-making is at a delicate moment against the backdrop of global market turmoil.

After the Federal Reserve's substantial rate cuts, any more hawkish signals from the Bank of Japan could further strengthen the yen, potentially putting pressure on the stock prices of Japanese exporters.

The Japanese economy rebounded in the second quarter as households and businesses increased spending.

Policymakers hope that strong wage increases this year will help households better cope with inflation, allowing the so-called virtuous economic cycle to take root in the economy.

Japan's real wages have risen for two consecutive months.