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BoJ set to hold rates at 1.00%, focus shifts to next hike timing
Markets will look to Governor Kazuo Ueda’s guidance and the BoJ’s Outlook Report for signals on whether the next move is in September, October, or December.
Action Forex says the Bank of Japan is widely expected to keep its policy rate unchanged at 1.00% on Friday, after delivering a 25 basis point hike in June that lifted borrowing costs to a 31 year high.
With no policy change anticipated, attention will shift to Governor Kazuo Ueda’s guidance, the quarterly Outlook Report, and any signals on when the next rate hike could occur. While the base case remains a December move that would take rates to 1.25% by year end, Action Forex notes September or October could become live options if inflation proves more persistent or if the yen resumes weakening.
The preview also points to inflation dynamics as a key part of the BoJ’s messaging. Action Forex says policymakers are likely to keep a tightening bias and a broadly balanced tone, even alongside a renewed warning that inflation could overshoot the BoJ’s 2% target, with recent pressure tied to yen weakness, elevated energy costs, and rising wage growth.
Action Forex adds that Friday’s meeting will include the first appearance of board member Ayano Sato, the second appointee from dovish PM Sanae Takaichi, increasing scrutiny of the policy board’s balance of views. The BoJ’s Outlook Report is expected to show a somewhat stronger growth backdrop as Middle East tension concerns have eased, while inflation forecasts may be adjusted slightly lower due to government subsidies and softer oil prices, even as upside risks persist from renewed energy volatility and import costs tied to the weak yen.