According to Jin10, the Bank of Japan is likely to pause this week to assess the impact of its earlier increase in the policy rate to a 30-year high. Markets are closely watching the bank's latest economic and inflation forecasts for clues on the timing and pace of future action.
The Bank of Japan is widely expected to keep its policy rate unchanged at 1% when its two-day meeting ends on Friday. At its previous meeting in June, the bank raised rates to a 31-year high, saying higher oil prices could push underlying inflation above its 2% target.
Despite ongoing concerns about inflation, the Bank of Japan's determination to tighten further has not changed. Markets have priced in expectations for at least one more rate hike before year-end.
Although uncertainty in the Middle East has pushed crude prices up again, policymakers believe the risk of a sharp slowdown in the Japanese economy is low. They expect the Japanese government to ensure ample energy supplies by using transport routes that bypass the Strait of Hormuz.
The weaker yen remains one of the main factors affecting Japan's price trends, adding to the burden from already high energy prices and potentially pushing up import costs. Barclays economists said the Bank of Japan may be forced to raise rates as early as September if the yen falls sharply and currency intervention by Japanese authorities fails to stop the decline.
Bank of Japan Expected to Hold Rates as Markets Watch June Hike Impact
2026-07-28 07:12:56
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