The Bank of Japan is expected to raise interest rates Friday for the first time since January, potentially hitting their highest level in 30 years and adding pressure to debt markets.

Rising yields on Japanese government bonds and a weaker yen reflect concerns over Prime Minister Sanae Takaichi’s fiscal policies and Japan’s heavy reliance on imports.

Despite a 0.6% contraction in the third quarter, inflation has remained above the BoJ’s 2% target, with core consumer prices up 3% in October, prompting policymakers to act, the AFP has reported.

The rate hike, expected to move the main rate from 0.5% to 0.75%, follows Japan’s recent stimulus package funded largely by borrowing, raising fears over the country’s already high debt-to-GDP ratio of 232.7%.

Analysts warn that higher rates and fiscal concerns may undermine economic stability and medium- to long-term financial market health, offsetting stimulus efforts.