Moody's: Bank of Japan will continue to hold its ground due to uncertainty

The Bank of Japan will opt for a wait-and-see approach at its meeting next week, according to Moody's analyst Stefan Angelic. While better-than-expected GDP growth, stubborn inflation and a new devaluation of the yen have made rate hikes possible, policymakers are likely to remain cautious amid political uncertainty at home and abroad, the economist said. The resignation of Prime Minister Shigeru Ishiba has disrupted the policy outlook, the situation overseas is not much better, and doubts about the US-Japan trade deal remain. Meanwhile, Japan's exports and industrial output are weakening, and consumer spending is contracting. "Demand-induced inflation is not enough to warrant a rate hike this month," Angelic wrote. This is not to say that the Bank of Japan cannot raise interest rates, but given the uncertain economic outlook, policymakers may want more clarity.