Favoring citations in the same journal I have once, some time ago, received a rejection notice in which the journal editor made what I thought was a peculiar comment. The reviewers all found that the work was good, but one emitted a doubt that I had chosen the right journal for it, saying the paper might not appeal to the broad readership of the journal (it was a general physics journal). So far, nothing out of the ordinary.

However, the editor indicated that his judgment to reject the paper was based on the fact that very few of the citations in the manuscript actually referred to the journal I had submitted it to. (Like, 2 citations out of 35. Some of the other citations were to other general physics journals, some to more specific journals.)

Back then, this looked very weird to me. To some extent, it could be interpreted as a push by the editor to increase self-citation of his journal. It has never occurred to me since.

Is it common practice? When does it become ethically wrong?
It is not unheard of. For a journal that I submit regularly to the instructions for authors state


  Given that the Journal has been in existence for over 80 years and has
  published of the order of 35,000 papers on a wide variety of
  acoustical topics over its lifetime, the absence of any references to
  previously published papers in the Journal raises a flag signaling the
  possibility that the paper lies outside the de facto scope of the
  Journal


I think it really is a scope question and not a self citation question. That said, the handling editors of this journal often alert authors during the later stages of review of potentially relevant in press publications within the journal. Most have been relevant and I am happy to add the sentence or two to the background, but I also think of it as a clear attempt at increasing self citation counts.