The Bank of Japan looks set to raise interest rates this week unless Trump’s inauguration address as U.S. president on Monday rattles financial markets, say people familiar with the central bank’s thinking.

Japan's central bank has increased the cost of borrowing to its highest level in 17 years after consumer price rises accelerated in December. The move by the Bank of Japan (BOJ) to raise its short-term policy rate to "around 0.5 per cent" comes just hours after the latest economic data showed prices rose last month at the fastest pace in 16 months.

The move would mark the central bank's first rate hike since July last year, when it increased rates to 0.25%.

Japan’s biggest banks are nearing a key valuation level for the first time in almost a decade as investors bet that the Bank of Japan will raise interest rates on Friday and accelerate its normalisation of monetary policy.

The Bank of Japan concludes its first policy meeting of the year on Friday with the outcome to be announced days after the inauguration of U.S. President Donald Trump. Here is a guide on what to expect and why the BOJ's rate review matters: WHEN DOES THE BOJ MEETING TAKE PLACE?

Out of 19 economists, 18 agreed on prospects of a rate hike, with most pointing to a recent change in tone of the BOJ leadership as driving their expectations.